vero insurance new zealand limited and subsidiaries · p j r snowball executive g c dransfield...

Vero Insurance New Zealand Limited and subsidiaries Consolidated financial report for the financial year ended 30 June 2015

VERO INSURANCE NEW ZEALAND LIMITED | CONSOLIDATED FINANCIAL REPORT 2014/15 2

Vero Insurance New Zealand Limited and subsidiaries

Consolidated financial report for the financial year ended 30 June 2015

Contents Page

Directors’ report .............................................................................................................................................3

Corporate governance statement .................................................................................................................6

Independent Auditor’s report .........................................................................................................................9

Statements of comprehensive income ....................................................................................................... 11

Statements of financial position ................................................................................................................. 12

Statements of changes in equity ................................................................................................................ 13

Statements of cash flows ........................................................................................................................... 14

Notes to the financial statements ............................................................................................................... 15

1. Reporting entity ................................................................................................................................ 152. Basis of preparation ......................................................................................................................... 153. Dividends ......................................................................................................................................... 184. Revenue ........................................................................................................................................... 185. Net incurred claims .......................................................................................................................... 196. Profit before tax ................................................................................................................................ 207. Income tax ....................................................................................................................................... 208. Cash and cash equivalents .............................................................................................................. 229. Receivables and other assets .......................................................................................................... 2210. Investment securities ....................................................................................................................... 2311. Reinsurance and other recoveries receivable ................................................................................. 2312. Deferred reinsurance premiums ...................................................................................................... 2313. Deferred acquisition costs ............................................................................................................... 2414. Investment in subsidiaries ............................................................................................................... 2415. Intangible assets .............................................................................................................................. 2416. Payables and other liabilities ........................................................................................................... 2617. Unearned premium liabilities ........................................................................................................... 2618. Outstanding claims liabilities ............................................................................................................ 2719. Employee benefit obligations ........................................................................................................... 3220. Share capital .................................................................................................................................... 3721. Capital management ........................................................................................................................ 3722. Credit rating ..................................................................................................................................... 3823. Notes to the statements of cash flows ............................................................................................. 3924. Financial instruments ....................................................................................................................... 3925. Risk management ............................................................................................................................ 4226. Commitments of expenditure ........................................................................................................... 5227. Related parties ................................................................................................................................. 5228. Auditor’s remuneration ..................................................................................................................... 5429. Contingent liabilities ......................................................................................................................... 5530. Significant accounting policies ......................................................................................................... 5531. Subsequent events .......................................................................................................................... 65

Directors’ report


Directors’ report The Board of Directors presents the Directors’ report together with the financial report of Vero Insurance New Zealand Limited (the Company) and of the Group, being the Company and its subsidiaries, for the financial year ended 30 June 2015.

With the agreement of the shareholder, the Company has taken advantage of reporting concessions available to it under Section 211(3) of the Companies Act 1993.

Directors The following persons were Directors of the Company during the whole of the financial year and up to the date of this report:

Non-executive E S Edgar D M Flacks G T Ricketts (Chairman) P J R Snowball Executive G C Dransfield (Chief Executive Officer)

Registered office Vero Centre 48 Shortland Street Auckland 1010 New Zealand

Auditor KPMG 18 Viaduct Harbour Avenue Auckland 1140 New Zealand

Dividends During the financial year, the Company paid dividends totalling $67,300,000 (2014: $152,000,000). Further details of dividends paid are set out in Note 3 to the financial statements.

Principal activities The principal activities of the Group during the course of the financial year were the underwriting of general insurance and the investment and administration of insurance funds. There has been no significant change in the nature of these activities during the year.

Review of operations The net profit after income tax for the year ended 30 June 2015 was $159,559,000 for the Group compared with net profit after income tax of $86,824,000 for the previous year ended 30 June 2014. The net profit after income tax for the year ended 30 June 2015 was $142,557,000 for the Company compared with net profit after income tax of $83,052,000 for the previous year ended 30 June 2014.

Events subsequent to reporting date There is, at the date of this Report, no matter or circumstance that has arisen since 30 June 2015 that has significantly affected, or may significantly affect: (a) the Company and Group’s operations in future financial periods; (b) the results of those operations in future financial periods; or (c) the Company and Group’s state of affairs in future financial periods.

Directors’ report (continued)


Information on Directors in office at the date of this report

Gary C Dransfield MAICD Director since 2011. Mr Dransfield is a highly experienced financial services executive who joined the Suncorp Group in 2009. He has held senior management positions in the retail financial services industry over the last 25 years. Mr Dransfield is also a director of Vero Liability Insurance Limited and AA Insurance Limited, subsidiaries of Vero Insurance New Zealand Limited.

Mr Dransfield is President of the Insurance Council of New Zealand.

Sir Eion S Edgar KNZM BCom, FACA, LL.D (Hon) Director since 2010. Sir Eion has extensive corporate experience in New Zealand, with a strong background in investment, education, the arts, sport and philanthropy.

He is also a director of Vero Liability Insurance Limited and Asteron Life Limited (a related company of Vero Insurance New Zealand Limited). He is Chairman of Forsyth Barr Group Limited, Queenstown Resort College Limited and the Winter Games NZ Trust.

His previous roles have included Chairman of the New Zealand Stock Exchange, director of the Reserve Bank of New Zealand and the Accident Compensation Corporation, Chancellor of the University of Otago and Chairman of the Central Lakes Trust.

Sir Eion was also President of the New Zealand Olympic Committee and on his retirement was made Honorary President (for Life). He is a former National Business Review New Zealander of the Year, and Senior New Zealander of the Year, and was inducted into the New Zealand Business Hall of Fame in 2004.

David M Flacks BA, MA, St John's College, University of Cambridge Director since December 2013. Mr Flacks is an experienced corporate and commercial lawyer who is a director of Flacks & Wong, boutique corporate lawyers, having recently retired from the partnership of Bell Gully, Solicitors. He has significant commercial, governance and strategic experience gained as a leading corporate lawyer and member of one of the executive teams of one of New Zealand’s largest listed companies.

He is chair of the NZ Markets Disciplinary Tribunal and a member of the Takeovers Panel. He is also a director of Harmoney Corp Limited and Vero Liability Insurance Limited.

Geoffrey T Ricketts CNZM LLB (Hons), FInstD Director since 1992. Mr Ricketts is a commercial lawyer, having been a partner at Russell McVeagh, Solicitors for over 25 years. He has extensive experience in New Zealand and Australia.

He is also a non-executive director of Suncorp Group Limited, the ultimate parent company of Vero Insurance New Zealand Limited, and a director of a number of other companies. He is chairman of Vero Liability Insurance Limited, Asteron Life Limited, The Todd Corporation Limited and Heartland Bank Limited.

Patrick J R Snowball MA, Hon. LL.D Director since 2010. Mr Snowball is an experienced financial services executive with extensive knowledge of the insurance industry, having overseen businesses in the United Kingdom, Ireland, Canada and Asia.

Mr Snowball is also the Managing Director and Chief Executive Officer of Suncorp Group Limited.

His previous directorships have included Norwich Union plc, Aviva plc and Jardine Lloyd Thompson plc, and he has also held deputy chairman and chairman roles in the United Kingdom.

He was also on the FSA Practitioner Panel 2005 – 2007.

Corporate governance statement


Corporate governance statement Introduction Vero Insurance New Zealand Limited (“the Company”) is a New Zealand incorporated licensed insurer which is wholly-owned by Suncorp Group Holdings (NZ) Limited. The ultimate parent of the Company is Suncorp Group Limited, an Australian public company which is listed on the Australian Securities Exchange.

This corporate governance statement contains an outline of the principal corporate governance practices, policies and processes that have been established by the Company.

Board of Directors At the date of this Statement, the Board comprised three independent non-executive Directors (Geoffrey Ricketts, Sir Eion Edgar and David Flacks), one non-executive Director who is not independent (Patrick Snowball) and one executive Director who is also the Chief Executive Officer of the Company (Gary Dransfield). Geoffrey Ricketts is the Chairman of the Board. Brief details of the Directors’ qualifications and experience are set out in the Directors’ Report.

The Board has adopted a Board Renewal Policy. Under this Policy, the Board is required to take into account a wide range of factors when considering an appointment to, or the composition of, the Board. These factors include size, composition and diversity of the Board, mix of competencies, qualities and skills held by existing Directors and how the skills of a new Director may be utilised for the effective and prudent management of the Company and how the candidate’s attributes will balance and complement the future requirements of the Board. Other key considerations include culture fit and an understanding of the business of the Company and the environment in which it operates. The Board considers it important to maintain an appropriate mix of long-serving Directors with established knowledge of the Company’s business and corporate history, and new Directors who bring fresh perspectives to the Board. There is a Board-approved process for nominating and appointing Directors.

A Board skills matrix has recently been adopted in order to assist the Board to ensure that the composition of the Board remains appropriate. This will also be used as part of the annual Board performance evaluation process.

The Board of the Company has approved criteria for assessing the independence of its non-executive Directors. These criteria are used in conjunction with the Governance Guidelines issued by the Reserve Bank of New Zealand.

New Directors undergo an induction process and all Directors are expected to keep up to date with matters affecting the business of the Company, the Suncorp Group, the general insurance industry and their duties as Directors.

Each Director has met the requirements and criteria set out in the Board-approved Fit and Proper Policy and must complete an annual fit and proper declaration which is approved by the Board.

Duties and Responsibilities of the Board The Board of Directors has overall responsibility for the performance of the Company. The Board has delegated the day-to-day operation and management of the business of the Company to the Chief Executive Officer.

Under the Company’s constitution, each Director is required to act in the best interests of the Company. Other matters covered by the constitution include the appointment and removal of Directors, the minimum number of Directors, the quorum for Board meetings, meeting procedures, Directors’ interests and Directors’ remuneration and other benefits.

The Board has adopted a charter which contains the principles for the operation of the Board, a description of the functions and responsibilities of the Board and those functions that are delegated to management. Matters covered by this charter include Board composition, responsibilities of the Chairperson and individual Directors, conflicts of interest, Board meeting procedures and Board performance reviews. Provision is also made for the Board to delegate certain matters to committees. The Board is required to review its charter at least annually and the review for the current year has been completed.

Corporate governance statement (continued)


Duties and Responsibilities of the Board (continued) Scheduled Board meetings are held on a quarterly basis. Otherwise, Board meetings are held as often as are deemed necessary by Directors to fulfil their duties and responsibilities. The Board approves an annual programme of work and this is used as a guide to the preparation of each scheduled Board meeting’s agenda.

The Board approves the strategic direction of the Company and monitors executive management performance in the implementation and achievement of strategic and business objectives through the receipt of regular reports from management. Other matters that are approved by the Board include the Company’s Risk Appetite Statement, Internal Capital Adequacy Assessment Process (ICAAP), dividend payments, financial statements and solvency returns, major operating and capital expenditure which exceeds management’s limits, and the financial performance outcomes for the Company’s senior executives.

Governance As the Company is part of the Suncorp Group, it complies with Suncorp Group’s policies and requirements, except where these are inconsistent with New Zealand legal or regulatory requirements. The Board of the Company has formally adopted a number of Suncorp Group’s policies (amended to reflect New Zealand requirements where appropriate). These include Conflicts of Interest, Business Continuity, Whistleblower, Product Approval, Sanctions, Securities Trading, Equal Employment Opportunity and Diversity, Safety and Wellbeing, Operational Risk and Outsourcing. Directors are also required to abide by Suncorp Group’s Code of Conduct.

The Company has also adopted Company-specific policies where appropriate. These include Delegations of Authority.

Board Audit and Risk Committee In order to enable the Board to focus on strategy, planning and performance enhancement, the Board has delegated certain duties to its Board Audit and Risk Committee (BARC). The role of the BARC is to assist the Board in fulfilling its statutory and fiduciary responsibilities with respect to the oversight of the effectiveness of risk management strategies and internal controls across the Company. The terms of reference of the BARC are contained in a Board-approved BARC charter. All of the non-executive Directors of the Board are members of the BARC and the majority of members are independent. Sir Eion Edgar, an independent non-executive Director of the Company, has a finance and accounting background and chairs the BARC.

The BARC is required to meet not less than four times a year. The BARC approves an annual programme of work and this is used as a guide to the preparation of each BARC meeting agenda. The BARC receives regular reports from senior executives including the Chief Risk Officer and the Chief Financial Officer of the Company. Regular reports are also received from Suncorp Group Internal Audit (which provides independent and objective internal audit services to the Suncorp Group), and the Company’s external auditor. Other attendees of BARC meetings include the Company’s Chief Executive Officer and representatives from the Company’s Risk and Finance functions, Suncorp Group Internal Audit, the Suncorp Group Chief Risk Officer, and the external auditor. The BARC reviews and makes recommendations to the Board on matters such as the Company’s Risk Appetite Statement, its annual business licence, ICAAP, investment strategy and mandate reviews, investment policy, financial statements and solvency returns. The BARC regularly updates the Board on its activities and provides its minutes to the Board.

Under the terms of its charter, the BARC is required to undertake an annual assessment of its effectiveness in meeting the requirements of its charter. The results are reported to the Board. The BARC is also required to review its charter at least annually.

The Vero New Zealand Asset and Liability Committee and the Vero New Zealand Risk Governance Committee are management committees that oversee the management of certain risks arising from the activities of the Company and its subsidiary Vero Liability Insurance Limited. Each of these committees has its own terms of reference which have been approved by the BARC. The BARC also reviews the effectiveness of these committees.

lnformation on the Company’s approach to Risk Management is contained in Note 25.

Corporate governance statement (continued)


Corporate Social Responsibility Brighter Futures is the Suncorp Group Community Giving programme that enables Suncorp Group employees to become involved, donate, fundraise and volunteer to make a difference to the causes close to their hearts. The mission of the programme is to make giving easier, more enjoyable and more accessible for our employees.

Our employees have the opportunity to take one day paid leave each year to support local community projects. At Vero New Zealand, our employees have taken part in volunteering opportunities for charities such as Riding for the Disabled, Ronald McDonald House, and Raukatauri Music Therapy. More than 50 Vero employees have participated in a volunteer day since November 2014.

Brighter Futures Community Grants provide employees with the opportunity to nominate individuals, charities or local community organisations for funding. Seven New Zealand charities have benefited from grants in the last 12 months – including the Lighthouse Counselling Trust, Big Brothers Big Sisters, and the Youth Team Trust, to name a few.

Grants are awarded to those applications that demonstrate the greatest impact for communities and individuals in New Zealand and Australia, as determined by the Suncorp Brighter Futures Internal Advisory Panel. Grants of between $1,000 and $10,000 are available. The Brighter Futures Advisory Panel reviews applications twice a year and awards a minimum of $200,000 in grants.

Our Dollar Matching programme will match the fundraising amounts of employees, up to $500, to a registered charity in New Zealand or Australia.

Vero New Zealand’s commitment to Brighter Futures was re-launched in November 2014 and has been well-supported by our employees. Our recent employee engagement survey (SEE) indicated that 41 percent intended to take part in the Brighter Futures programme within the next 12 months.

Statements of comprehensive income for the financial year ended 30 June 2015

The statements of comprehensive income are to be read in conjunction with the accompanying notes.


Statements of comprehensive income Note

2015 2014 2015 2014$'000 $'000 $'000 $'000

Premium revenue 4 1,272,581 1,218,914 915,908 889,722Outwards reinsurance premium expense 12 (231,183) (241,234) (188,593) (199,747)Net premium revenue 1,041,398 977,680 727,315 689,975Claims expense 5 (1,172,106) (998,808) (872,494) (759,595)Reinsurance and other recoveries revenue 4, 5 640,798 434,469 532,829 376,611Net incurred claims 5 (531,308) (564,339) (339,665) (382,984)Acquisition costs 13 (256,285) (237,237) (214,174) (195,160)Other underwriting expenses (97,379) (97,135) (62,508) (66,761)Underwriting expenses (353,664) (334,372) (276,682) (261,921)Reinsurance commission revenue 4 6,355 6,651 4,551 4,672Underwriting result 162,781 85,620 115,519 49,742Investment income on insurance funds 4.1 28,306 11,836 19,066 5,747Investment expense on insurance funds (1,204) (915) (839) (590)Insurance trading result 189,883 96,541 133,746 54,899Investment income on shareholder funds 4.1 29,759 23,600 51,972 47,748Investment expense on shareholder funds (1,141) (1,021) (737) (682)Gain on defined benefit funds 1,130 675 1,086 575Finance costs 6 (258) (244) (258) (244)Profit before tax 6 219,373 119,551 185,809 102,296Income tax expense 7.1 (59,814) (32,727) (43,252) (19,244)Profit for the financial year 159,559 86,824 142,557 83,052Other comprehensive (loss)/income

Actuarial (loss)/gain on defined benefit funds (2,984) 2,876 (2,755) 2,951Income tax credit/(expense) 7.1 771 (826) 771 (826)

(2,213) 2,050 (1,984) 2,125Total comprehensive income for the financial year 157,346 88,874 140,573 85,177Profit for the financial year attributable to:Owners of the Company 147,736 78,684 142,557 83,052Non-controlling interests 11,823 8,140 - -Profit for the financial year 159,559 86,824 142,557 83,052Total comprehensive income for the financial year attributable to:Owners of the Company 145,596 80,758 140,573 85,177Non-controlling interests 11,750 8,116 - -Total comprehensive income for the financial year 157,346 88,874 140,573 85,177

Consolidated Company

Items that will not be reclassified subsequently to profit or loss

Total other comprehensive (loss)/income

Statements of changes in equity for the financial year ended 30 June 2015

The statements of changes in equity are to be read in conjunction with the accompanying notes.


Statements of changes in equity Consolidated Note

Share capital

Retained profits Total

Total Equity

$'000 $'000 $'000 $'000 $'000Balance as at 1 July 2013 275,940 278,214 554,154 31,842 585,996Profit for the financial year - 78,684 78,684 8,140 86,824Total other comprehensive income/(loss) - 2,074 2,074 (24) 2,050Total comprehensive income for the financial year - 80,758 80,758 8,116 88,874Transactions with the owners, recorded directly in equity Dividends declared 3 - (152,000) (152,000) (6,400) (158,400)Share-based payments 20 225 - 225 - 225Balance as at 30 June 2014 276,165 206,972 483,137 33,558 516,695Profit for the financial year - 147,736 147,736 11,823 159,559Total other comprehensive loss - (2,140) (2,140) (73) (2,213)Total comprehensive income for the financial year - 145,596 145,596 11,750 157,346Transactions with the owners, recorded directly in equity Dividends declared 3 - (67,300) (67,300) (8,000) (75,300)Share-based payments 20 282 - 282 - 282Balance as at 30 June 2015 276,447 285,268 561,715 37,308 599,023

Equity attributable to owners of the Company Non-

controlling interest

Company Note

Share capitalRetained

profits Total$'000 $'000 $'000

Balance as at 1 July 2013 275,940 210,218 486,158Profit for the financial year - 83,052 83,052Total other comprehensive income - 2,125 2,125Total comprehensive income for the financial year - 85,177 85,177Transactions with the owners, recorded directly in equity Dividends declared 3 - (152,000) (152,000)Share-based payments 20 225 - 225Balance as at 30 June 2014 276,165 143,395 419,560Profit for the financial year - 142,557 142,557Total other comprehensive loss - (1,984) (1,984)Total comprehensive income for the financial year - 140,573 140,573Transactions with the owners, recorded directly in equity Dividends declared 3 - (67,300) (67,300)Share-based payments 20 282 - 282Balance as at 30 June 2015 276,447 216,668 493,115

Statements of cash flows for the financial year ended 30 June 2015

The statements of cash flows are to be read in conjunction with the accompanying notes.


Statements of cash flows Note

2015 2014 2015 2014$'000 $'000 $'000 $'000

Cash flows from operating activitiesPremiums received 1,274,117 1,236,785 914,436 899,173Claims paid (1,516,704) (1,731,322) (1,262,657) (1,507,827)Interest received 42,695 44,153 33,723 34,951Dividends received 3,110 2,859 32,310 34,813Reinsurance and other recoveries received 1,127,434 1,249,898 1,047,413 1,202,457Outward reinsurance premiums paid (230,446) (238,376) (186,624) (199,876)Net movement in shared property reinstatement advances 18,515 - 14,064 -Acquisition costs paid (252,781) (234,659) (211,976) (195,154)Income tax (paid)/refunded* (78,258) (7,619) (54,754) 5,139Finance costs paid (199) (291) (199) (291)Underwriting and other operating expenses paid (89,562) (70,756) (61,639) (35,405)Net cash from operating activities 23 297,921 250,672 264,097 237,980

Cash flows from investing activitiesProceeds from sale of investment securities 949,211 740,602 645,923 537,945Payments for purchase of investment securities (968,976) (813,654) (660,544) (608,674)Proceeds from sale of plant and equipment 668 568 597 505Payments for purchases of plant and equipment and capitalised software costs (9,241) (5,198) (8,785) (4,726)Net cash used in investing activities (28,338) (77,682) (22,809) (74,950)

Cash flows from financing activitiesDividends paid to owners of the Company (76,234) (143,066) (76,234) (143,066)Dividends paid to non-controlling interests (8,000) (6,400) - -Net cash used in financing activities (84,234) (149,466) (76,234) (143,066)

Net increase in cash and cash equivalents 185,349 23,524 165,054 19,964Cash and cash equivalents at the beginning of the financial year 79,253 55,729 65,448 45,484Cash and cash equivalents at the end of the financial year 264,602 79,253 230,502 65,448* Income tax (paid)/refunded includes cash f low s from tax offsets w ith New Zealand group companies


Notes to the financial statements


Notes to the financial statements

1. Reporting entity

Vero Insurance New Zealand Limited (the Company) is a company incorporated and domiciled in New Zealand. Its registered office is Vero Centre, 48 Shortland Street, Auckland.

The consolidated financial statements of the Company as at and for the financial year ended 30 June 2015 comprise the Company and its subsidiaries (the Group) and were issued by the Board of Directors on 29 July 2015.

The Group is a profit oriented entity in the business of underwriting general insurance and the investment and administration of insurance funds. It has a mix of intermediated (through brokers) and direct business within the general insurance industry. It operates predominantly throughout New Zealand.

The Company’s parent entity is Suncorp Group Holdings (NZ) Limited, with Suncorp Group Limited, a company incorporated in Australia, being the ultimate parent entity. Suncorp Group Limited and its subsidiaries are referred to as the Suncorp Group.

2. Basis of preparation

The Company and the Group are for-profit entities and the consolidated financial statements have been prepared on the historical cost basis unless the application of fair value measurements are required by the relevant accounting standards such as the measurement of financial instruments designated at fair value through profit or loss and the measurement of outstanding claims liabilities, reinsurance recoveries and defined benefit schemes.

Significant accounting policies applied in the preparation of these financial statements are set out in Note 30. There have been no significant changes to accounting policies during the financial year.

The reporting period is from 1 July 2014 to 30 June 2015.

These financial statements are presented in New Zealand dollars, which is the Company’s and Group’s functional and presentation currency. All values are rounded to the nearest thousand dollars ($'000) unless stated otherwise.

The accompanying statements of financial position have been prepared using the liquidity format of presentation.

2.1 Statement of compliance

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with New Zealand Generally Accepted Accounting Practice in New Zealand (NZ GAAP). They comply with the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS), and other applicable Financial Reporting Standards as appropriate for profit oriented entities. The Company is an FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013. The financial statements have been prepared in accordance with the requirements of the Financial Markets Conduct Act 2013, Companies Act 1993, Financial Reporting Act 2013 and the Insurance (Prudential Supervision) Act 2010. They also comply with International Financial Reporting Standards (IFRS).

Notes to the financial statements (continued)


2.2 New or amended standards adopted during the financial year

NZ IAS 32 (Amendments) Disclosures—Offsetting Financial Assets and Financial Liabilities issued in February 2012 became effective for the current financial year and has been applied retrospectively. It clarifies the meaning of “currently has a legally enforceable right to set-off” and also clarifies the application of the NZ IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The adoption of this revised standard had no impact on the amounts recognised in the current period or any prior period.

NZ IFRS 7 (Amendments) Disclosures—Offsetting Financial Assets and Financial Liabilities issued in February 2012 became effective for the current financial year and has been applied retrospectively. The revised standard requires disclosure of new information in respect of the Group’s use of enforceable netting arrangements and similar agreements, including the effects of financial collateral. These amendments require entities to disclose both gross and net amounts of recognised financial assets and liabilities associated with master netting and similar arrangements, whether or not they are presented net on the face of the statements of financial position. These disclosures enable users of financial statements to better evaluate the effect or potential effect of netting arrangements on the entity’s financial position. The new information is disclosed in Note 24.3.

Other new reporting standards, amendments to standards and interpretations that became effective in the current financial year were not applicable to the Group or had no impact on these consolidated financial statements.

2.3 Comparative information

Certain amounts and presentations in the comparative information have been restated (or reclassified) to conform to changes in the current financial year. The material changes are detailed below:

a) Cash and cash equivalents reclassification

Cash and deposits at call held within the Company and Group’s investment portfolios have been reclassified from investment securities to cash and cash equivalents. These balances are highly liquid and are able to be transferred into operating bank accounts within one day. The reclassification amounted to $65,229,000 for the Group and $55,172,000 for the Company as at 30 June 2014.

b) Fair value hierarchy reclassification

The fair value hierarchy of term deposits and transferable certificates has been reclassified from Level 1 to Level 2 due to the fact that they are not being traded in an active market. This reclassification amounted to $104,382,000 for the Group and $77,805,000 for the Company as at 30 June 2014, refer to Note 24.2.

c) Change in presentation

Investment revenue has been split between investment income from insurance and shareholder funds in the statements of comprehensive income in accordance with the accounting policy outlined in Note 30.5(d).



2.4 Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and amounts reported in the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Estimates and underlying assumptions are reviewed on an ongoing basis. Where revisions are made to accounting estimates, any financial impact is recognised in the period in which the estimate is revised.

The key areas of significant estimates and judgements and the methodologies used to determine key assumptions are set out below.

a) Outstanding claims liability

The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. Given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.

Claims reported to the Group at balance date are estimated with due regard to the claim circumstance as reported by the insured, legal representative, assessor, loss adjuster and/or other third party and then combined, where appropriate, with historical evidence on the cost of settling similar claims. Estimates of the cost of claims reported are reviewed regularly and are updated as and when new information arises.

The estimation of claims incurred but not reported (IBNR) and claims incurred but not enough reported (IBNER) are generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Group, where more information about the claim event is generally available. IBNR and IBNER claims may often not be adequately reported until many years after the events giving rise to the claims have happened. Long-tail classes of business will typically display greater variations between initial estimates and final outcomes because there is a greater degree of difficulty in estimating IBNR and IBNER reserves. Short tail claims are typically reported soon after the claim event, and hence, estimates are more certain.

In calculating the estimated cost of unpaid claims, the Group uses a variety of estimation techniques, generally based upon statistical analysis of historical and industry experience that assumes that the development pattern of the current claims will be consistent with past experience and/or general industry benchmarks as appropriate.

Allowance is made, however, for changes or uncertainties that may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims. The ultimate net outstanding claims provision also includes an additional risk margin to allow for the uncertainty within the estimation process.

Details regarding actuarial estimates and judgements are detailed in Notes 5, 11 and 18. In particular details of the uncertainties that exist in measuring gross incurred claims arising from the Canterbury earthquakes are explained in Note 18.1.

b) Assets arising from reinsurance contracts and other recoveries

Estimates of reinsurance and other recoveries receivable are also computed using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk.

Details of the uncertainties that exist in measuring reinsurance recoveries arising from the Canterbury earthquakes are explained in Note 18.1.

c) Impairment of goodwill

The Group assesses whether goodwill is impaired at least annually. The assessment involves estimations of the recoverable amount of the cash-generating units to which the goodwill is allocated. Refer to Note 15.2.



3. Dividends

4. Revenue

4.1 Investment Income

¢ per share $'000 ¢ per share $'000Ordinary sharesFinal dividend 36 67,300 46 84,900 Interim dividend - - 36 67,100 Total dividends recognised in equity attributable to owners of the Company 36 67,300 82 152,000

2015 2014

2015 2014 2015 2014$'000 $'000 $'000 $'000

Insurance incomeGross written premium 1,297,247 1,261,133 925,489 910,926Movement in unearned premium (24,666) (42,219) (9,581) (21,204)Premium revenue 1,272,581 1,218,914 915,908 889,722Reinsurance and other recoveries revenue 640,798 434,469 532,829 376,611Reinsurance commission revenue 6,355 6,651 4,551 4,672Total insurance income 1,919,734 1,660,034 1,453,288 1,271,005Investment incomeInterest income 42,665 41,967 33,692 32,882Dividend income Other entities 3,110 2,859 10 13 Related parties - - 32,300 34,800Net gain/(loss) on financial assets at fair value through profit or loss 12,290 (9,390) 5,036 (14,200)Total investment income 58,065 35,436 71,038 53,495Total revenue 1,977,799 1,695,470 1,524,326 1,324,500


2015 2014 2015 2014$'000 $'000 $'000 $'000

Investment income on insurance funds 28,306 11,836 19,066 5,747Investment income on shareholder funds 29,759 23,600 51,972 47,748Total investment income 58,065 35,436 71,038 53,495




5. Net incurred claims

Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.

Details of the uncertainties that exist in measuring gross incurred claims and reinsurance recoveries arising from the Canterbury earthquakes are explained in Note 18.1.

Current Year

Prior Year Total

Current Year

Prior Year Total

$'000 $'000 $'000 $'000 $'000 $'000Year ended 30 June 2015Gross incurred claims and related expenses

Undiscounted 657,568 461,300 1,118,868 414,012 404,326 818,338Discount and discount movement (7,395) 60,633 53,238 (2,097) 56,253 54,156

Gross incurred claims discounted 650,173 521,933 1,172,106 411,915 460,579 872,494Reinsurance and other recoveries

Undiscounted (97,254) (483,779) (581,033) (44,392) (429,092) (473,484)Discount and discount movement 1,160 (60,925) (59,765) 562 (59,907) (59,345)

Reinsurance and other recoveries discounted

(96,094) (544,704) (640,798) (43,830) (488,999) (532,829)

Net incurred claims 554,079 (22,771) 531,308 368,085 (28,420) 339,665Year ended 30 June 2014Gross incurred claims and related expenses

Undiscounted 614,676 329,575 944,251 395,330 313,778 709,108Discount and discount movement (7,326) 61,883 54,557 (3,023) 53,510 50,487

Gross incurred claims discounted 607,350 391,458 998,808 392,307 367,288 759,595Reinsurance and other recoveries

Undiscounted (69,559) (323,261) (392,820) (25,777) (306,709) (332,486)Discount and discount movement 1,061 (42,710) (41,649) 497 (44,622) (44,125)

Reinsurance and other recoveries discounted

(68,498) (365,971) (434,469) (25,280) (351,331) (376,611)

Net incurred claims 538,852 25,487 564,339 367,027 15,957 382,984




6. Profit before tax

Finance costs relate to the line fees and interest payable in respect of a $100 million Australian dollar denominated revolving loan facility entered into with Suncorp-Metway Limited, a related party. The loan was established to support large earthquake claims by providing a source of liquidity pending receipt of the related reinsurance recoveries. The term of the facility expired during the current financial year and was not renewed. The Company complied with all covenants under the facility during the financial year.

7. Income tax

7.1 Income tax expense

2015 2014 2015 2014$'000 $'000 $'000 $'000

Profit before tax is arrived at after charging/(crediting) the following specific items:Bad and doubtful debt expense/(recovery) (Note 9) 29 (16) 31 (18)Contributions to defined contribution superannuation 4,201 3,767 2,930 2,648Depreciation on plant and equipment 3,784 4,474 2,861 3,383Donations 32 29 27 21Employee benefits 150,233 154,656 103,776 109,971Finance costs 258 244 258 244Loss/(gain) on disposal of plant and equipment 63 (1) 57 15Operating lease rental expenses 9,922 8,657 6,881 5,585Software amortisation cost (Note 15.3) 1,898 2,078 1,898 2,063


2015 2014 2015 2014$'000 $'000 $'000 $'000

Profit before tax 219,373 119,551 185,809 102,296Prima facie income tax @ 28% (2014: 28%) 61,425 33,474 52,026 28,643Movement in income tax expense due to:Non-deductible expenditure 419 441 334 323Non-assessable dividend income - - (4,284) (5,936)Imputation credits (341) (335) (4,763) (3,812)Tax exempt revenue (1,562) (879) - -Other (65) (28) - -Adjustment for prior years (62) 54 (61) 26Income tax expense 59,814 32,727 43,252 19,244Income tax expense recognised in profit consists of:Current tax expenseCurrent year 64,005 25,361 45,971 11,844Adjustments for prior financial years (61) (330) 137 (21)

63,944 25,031 46,108 11,823Deferred tax (benefit)/expenseCurrent year (4,129) 7,312 (2,658) 7,374Adjustments for prior financial years (1) 384 (198) 47

(4,130) 7,696 (2,856) 7,421Income tax expense 59,814 32,727 43,252 19,244Income tax (credit)/expense recognised in other comprehensive incomeIncome tax on actuarial gains on defined benefit funds (771) 826 (771) 826




7.2 Imputation credits

The Company is a member of the Suncorp Group Holdings (NZ) Limited consolidated imputation credit account group (SGHNZL ICA Group) and together with the other members has access to the accumulated imputation credits contained within that SGHNZL ICA Group.

7.3 Current tax

7.4 Deferred tax

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:

2015 2014 2015 2014$'000 $'000 $'000 $'000

SGHNZL ICA Group 111,084 90,044 - 90,044Subsidiaries outside the SGHNZL ICA Group 7,169 4,711 - -Imputation credits available for use in subsequent reporting periods 118,253 94,755 - 90,044


2015 2014 2015 2014$'000 $'000 $'000 $'000

Balance at the beginning of the financial year (19,003) (1,590) (11,109) 5,852Income tax paid 26,747 5,841 13,717 31Current year tax on operating profit (64,005) (25,361) (45,971) (11,844)Adjustment for prior years 61 330 (137) 21Transfers between Group companies 51,511 1,777 41,036 (5,169)Balance at the end of the financial year (4,689) (19,003) (2,464) (11,109)


2015 2014 2015 2014$'000 $'000 $'000 $'000

Deferred tax assets are attributable toDepreciable assets 6,474 4,674 5,309 3,809Employee benefits 10,772 9,279 8,881 7,950Payables and other liabilities 4,552 2,077 3,509 1,638Total deferred tax assets 21,798 16,030 17,699 13,397Deferred tax liabilities are attributable toInvestments (27) (11) (27) (11)Deferred acquisition costs (32,493) (31,694) (26,965) (26,307)Risk margins (1,986) (1,934) - -Total deferred tax liabilities (34,506) (33,639) (26,992) (26,318)Net deferred tax liabilities (12,708) (17,609) (9,293) (12,921)MovementsDeferred tax assetsBalance at the beginning of the financial year 16,030 23,523 13,397 20,330Movement recognised in profit or loss 4,997 (6,667) 3,531 (6,107)Recognised in other comprehensive income 771 (826) 771 (826)Balance at the end of the financial year 21,798 16,030 17,699 13,397Deferred tax liabilitiesBalance at the beginning of the financial year (33,639) (32,611) (26,318) (25,003)Movement recognised in profit or loss (867) (1,028) (674) (1,315)Balance at the end of the financial year (34,506) (33,639) (26,992) (26,318)




8. Cash and cash equivalents

Shared property reinstatement deposits relate to advances received from other insurers and property owners for multi-unit property reinstatements arising from the Canterbury earthquake where the Group acts as the lead insurer to facilitate the property reinstatement on behalf of all property owners. These amounts are held in a separate bank account for the sole purpose of undertaking these property reinstatements.

9. Receivables and other assets

2015 2014 2015 2014$'000 $'000 $'000 $'000

Cash at bank and on hand 11,881 14,024 10,387 10,276Shared property reinstatement deposits (Note 16) 18,515 - 14,064 -Cash held within investment portfolios 234,206 65,229 206,051 55,172

264,602 79,253 230,502 65,448


2015 2014 2015 2014$'000 $'000 $'000 $'000

Trade and other receivablesPremiums due 434,908 411,780 305,793 294,740Amounts due from related parties (Note 27) 3,810 1,901 4,315 1,915Prepaid expenses 135 274 115 204Amounts due from reinsurers 36,996 69,956 35,076 72,464GST receivable - - 956 2,157Provision for bad and doubtful debts (6) (8) - -Total trade and other receivables 475,843 483,903 346,255 371,480Other assetsAccrued income 7,312 7,342 5,825 5,856Investment receivables 2,183 - 2,197 -Other assets 4,645 2,854 4,645 2,853Total other assets 14,140 10,196 12,667 8,709Total receivables and other assets 489,983 494,099 358,922 380,189Current 489,983 494,099 358,922 380,189Non-current - - - -Total receivables and other assets 489,983 494,099 358,922 380,189Movements in provision for bad and doubtful debtsBalance at the beginning of the financial year 8 32 - 26Provision raised/(released) during the financial year 29 (16) 31 (18)Receivables written off during the financial year (31) (8) (31) (8)Balance at the end of the financial year 6 8 - -




10. Investment securities

11. Reinsurance and other recoveries receivable

The balance of reinsurance and other recoveries receivable disclosed above is gross of deferred reinsurance liabilities of $171.8m for the Group and $142.4m for the Company (refer to Note 16).

Details of the uncertainties that exist in measuring reinsurance recoveries arising from the Canterbury earthquakes are explained in Note 18.1.

12. Deferred reinsurance premiums

2015 2014 2015 2014$'000 $'000 $'000 $'000

Financial assets at fair value through profit or lossInterest bearing securitiesDebentures and corporate bonds 286,068 287,021 229,041 224,024Government and semi-government securities 217,911 219,602 173,448 175,654Discounted securities 287,645 269,209 213,339 199,991

Total interest bearing securities 791,624 775,832 615,828 599,669

Derivatives (Note 24.3) 98 (495) 98 (495)Unit trusts 116,633 103,976 - -Equities 296 240 296 240

Total financial assets at fair value through profit or loss

908,651 879,553 616,222 599,414

Loans and receivablesStaff mortgages 61 66 61 66Total investment securities 908,712 879,619 616,283 599,480


2015 2014 2015 2014$'000 $'000 $'000 $'000

Expected future reinsurance and other recoveries undiscounted

848,721 1,192,078 773,857 1,158,744

Discount to present value (31,966) (91,612) (29,578) (88,921)Total reinsurance and other recoveries receivable 816,755 1,100,466 744,279 1,069,823Current 513,923 564,871 468,320 549,142

Non-current 302,832 535,595 275,959 520,681Total reinsurance and other recoveries receivable 816,755 1,100,466 744,279 1,069,823


2015 2014 2015 2014$'000 $'000 $'000 $'000

Balance at the beginning of the financial year 176,625 250,349 147,030 217,545Reinsurance premium liability incurred 272,131 167,510 221,802 129,232Reinsurance premium charged to profit or loss (231,183) (241,234) (188,593) (199,747)Balance at the end of the financial year 217,573 176,625 180,239 147,030




13. Deferred acquisition costs

14. Investment in subsidiaries

The Company’s investments in subsidiaries comprise shares held at cost. All entities are incorporated in New Zealand and have a balance date of 30 June.

15. Intangible assets

Intangible assets consist of two main components, goodwill and computer software. The value of the goodwill has been reviewed for impairment in accordance with NZ IAS 36 Impairment of Assets. Goodwill is deemed to have an indefinite useful life and has therefore not been amortised. Computer Software is deemed to have a finite life and is amortised at a rate of 20%-33% per annum on a straight line basis.

2015 2014 2015 2014$'000 $'000 $'000 $'000

Balance at the beginning of the financial year 113,192 109,119 93,952 89,286Acquisition costs deferred 252,781 234,659 211,976 195,154Amortisation charged to profit or loss (256,285) (237,237) (214,174) (195,160)Reinsurance commission recognised in profit or loss 6,355 6,651 4,551 4,672Balance at the end of the financial year 116,043 113,192 96,305 93,952


2015 2014$'000 $'000

Shares in subsidiaries 37,304 37,586

Company

2015 2014Trading subsidiaries Principle activity % %AA Insurance Limited General Insurance 68 68Vero Liability Insurance Limited General Insurance 100 100

Company

2015 2014 2015 2014$'000 $'000 $'000 $'000

Goodwill 81,608 81,608 82,147 82,147Computer software 7,433 3,414 7,433 3,414Total intangible assets 89,041 85,022 89,580 85,561




15.1 Goodwill

15.2 Impairment testing for cash-generating units containing goodwill

For the purpose of impairment testing, goodwill is allocated to significant cash generating units (CGU) as outlined in the table below.

The carrying amount of goodwill allocated to each CGU is compared to its recoverable amount determined based on a value-in-use basis and if the recoverable amount is lower, the asset is written down. For the year ended 30 June 2015, no impairment loss has been recognised (2014: nil).

Value in use was determined by discounting the future cash flows generated from the continuing use of these units and was based on the following key assumptions, for which the values have been obtained on the basis of past experience:

• Cash flows are projected from the financial forecasts prepared by the business units covering a threeyear period. Cash flows beyond the next three years are extrapolated using a constant growth rate of1.5%-2.5% (2014: 1.5%-2.5%), which does not exceed the long-term average growth rate for theindustry.

• The weighted average cost of capital is used as the post-tax discount rate 10.1% (2014: 11.5%).

• Investment income rates of 4.00%-5.23% for insurance funds and 4.75%-5.00% for shareholderfunds (2014: 3.56%-5.35% for insurance funds and 3.84%-5.61% for shareholder funds).

At 30 June 2015, the recoverable amount of each CGU is in excess of its carrying amount and, as a result, no impairment loss has been recognised in the profit or loss. Based on information available and market conditions at 30 June 2015, a reasonably possible change to any of the key assumptions made in this assessment would not cause the CGU's recoverable amount to be less than its carrying amount.

2015 2014 2015 2014$'000 $'000 $'000 $'000

At 1 JulyCost 94,869 94,869 95,345 95,345Accumulated impairment losses (13,261) (13,261) (13,198) (13,198)Balance at the beginning of the financial year 81,608 81,608 82,147 82,147Impairment losses - - - -Balance at the end of the financial year 81,608 81,608 82,147 82,147At 30 JuneCost 94,869 94,869 95,345 95,345Accumulated amortisation and impairment (13,261) (13,261) (13,198) (13,198)Balance at the end of the financial year 81,608 81,608 82,147 82,147


2015 2014 2015 2014$'000 $'000 $'000 $'000

AA Insurance 13,235 13,235 13,410 13,410AMP General 8,667 8,667 9,031 9,031Autosure 59,706 59,706 59,706 59,706Carrying amount of goodwill 81,608 81,608 82,147 82,147




15.3 Software

16. Payables and other liabilities

Deferred reinsurance liabilities relates to the settlement of reinsurance recoveries in relation to the 2010/2011 Canterbury earthquakes by entities in the Suncorp Group ahead of the actual settlement of the underlying claims. It comprises $187.3m for the Group and $156.2m for the Company received from a fellow subsidiary of the ultimate parent (refer to Note 27.2), less $15.6m and $13.9m respectively in relation to claims which were settled prior to 30 June 2015.

17. Unearned premium liabilities

17.1 Liability adequacy test

The liability adequacy test which was performed as at 30 June 2015 identified a surplus for the Group and Company (30 June 2014: surplus).

2015 2014 2015 2014$'000 $'000 $'000 $'000

At 1 JulyCost 33,991 31,825 32,333 30,167Accumulated amortisation and impairment (30,577) (28,499) (28,919) (26,856)Balance at the beginning of the financial year 3,414 3,326 3,414 3,311Additions – internally developed 5,917 2,166 5,917 2,166Amortisation charge (1,898) (2,078) (1,898) (2,063)Balance at the end of the financial year 7,433 3,414 7,433 3,414At 30 JuneCost 39,908 33,991 38,250 32,333Accumulated amortisation and impairment (32,475) (30,577) (30,817) (28,919)Balance at the end of the financial year 7,433 3,414 7,433 3,414


2015 2014 2015 2014$'000 $'000 $'000 $'000

Trade creditors and accruals 68,490 64,703 57,605 58,679GST payable 2,442 914 - -Investment payables - 779 - 939Amounts due to reinsurers 212,912 171,227 179,528 145,359Shared property reinstatement advances (Note 8) 18,515 - 14,064 -Deferred reinsurance liabilities (Note 11) 171,756 - 142,350 -Amounts due to related parties (Note 27) 1,052 10,882 15,945 13,576Total payables and other liabilities 475,167 248,505 409,492 218,553Current 315,212 248,505 272,444 218,553Non-current 159,955 - 137,048 -Total payables and other liabilities 475,167 248,505 409,492 218,553


2015 2014 2015 2014$'000 $'000 $'000 $'000

Balance at the beginning of the financial year 622,618 580,399 440,417 419,213Premiums written during the financial year (Note 4) 1,297,247 1,261,133 925,489 910,926Premiums earned during the financial year (Note 4) (1,272,581) (1,218,914) (915,908) (889,722)Balance at the end of the financial year 647,284 622,618 449,998 440,417




18. Outstanding claims liabilities

18.1 Gross outstanding claims liabilities

Despite significant progress in the settlement of 2010 and 2011 Canterbury earthquake claims, some uncertainty remains in the estimation of gross outstanding claims liabilities and the related reinsurance recoveries for these events. The uncertainty is large in dollar terms due to the volume, value and complexity of the outstanding earthquake claims relative to other outstanding claims on the statements of financial position.

At balance date the central estimate of gross outstanding claims liabilities, plus the net risk margin, attributed to the Canterbury earthquakes totals $0.81 billion and $0.77 billion for the Group and Company, respectively (2014: $1.16 billion and $1.15 billion respectively).

The central estimate represents actuarial estimates, as at 30 June 2015, of what the Group and Company ultimately has left to pay, prior to receiving any reinsurance recoveries in relation to these claims. Given the nature of the uncertainties associated with the remaining Canterbury earthquake claims, the actual claims experience may deviate, perhaps substantially, from the central estimate as at 30 June 2015.

The net risk margin represents additional provisions required to meet expected claim payments, net of all reinsurance, with a 90% probability of sufficiency. In the event of actual claims experience deviating from expectations, the net risk margin is designed to act as a buffer to minimise the impact on the Group’s financial performance.

Effective 19 June 2015, Suncorp Group Limited entered into an Adverse Development Cover (ADC) on behalf of the Group to cover Suncorp’s net exposure to losses arising from the February 2011 Canterbury earthquake above AU$3.1 billion. The attachment point and the limit of the ADC are such that no net risk margin is required for the February 2011 event at balance date.

Future movements in the AUD:NZD exchange rate can affect the net incurred claims position. This arises because claims are paid in New Zealand dollars, but the applicable catastrophe reinsurance programme is denominated in Australian dollars. This foreign exchange rate risk also applies to any commutations or recoveries received in advance from the Australian-denominated reinsurance programme. An allowance is made for foreign exchange risk in the central estimate as well as the net risk margin.

2015 2014 2015 2014$'000 $'000 $'000 $'000

Gross central estimate - undiscounted 1,097,167 1,477,628 948,913 1,366,397Discount to present value (48,182) (102,372) (41,696) (96,143)Claim handling expenses 44,320 60,770 30,279 54,619

Risk margin 46,076 47,953 32,155 35,645Gross outstanding claims liabilities 1,139,381 1,483,979 969,651 1,360,518Current 643,568 814,037 547,197 740,558

Non-current 495,813 669,942 422,454 619,960Gross outstanding claims liabilities 1,139,381 1,483,979 969,651 1,360,518




18.2 Reconciliation of movement in discounted outstanding claims liabilities

18.3 Claims development tables

The following tables show the development of undiscounted outstanding claims relative to the ultimate expected claims for the ten most recent accident years.

Note2015 2014 2015 2014$'000 $'000 $'000 $'000

Net outstanding claims liabilities at the beginning of the financial year

383,513 333,112 290,695 246,333

Prior periodsPayments net of reinsurance recoveries (208,920) (162,824) (160,024) (116,172)Movement in discounting 8,500 9,423 6,412 6,966Margin release on prior periods (34,816) (23,274) (26,635) (16,241)Incurred claims due to changes in assumptions and experience

(4,804) 43,353 (13,706) 28,133

Change in discount rate 4,581 (3,864) 3,353 (2,749)Change in claims handling expense rate (25) (151) (24) (151)Change in inflation assumption 3,420 2,029Movement in risk margins 373 - 151 -

Current periodNet ultimate incurred costs 554,079 538,852 368,085 367,026

Payments net of reinsurance recoveries (383,275) (351,114) (244,964) (222,450)Net outstanding claims liabilities at end of the financial year

322,626 383,513 225,372 290,695

Reinsurance and other recoveries receivable 11 816,755 1,100,466 744,279 1,069,823Gross outstanding claims liabilities 1,139,381 1,483,979 969,651 1,360,518


Consolidated 2015Accident year Prior 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

28,258 28,432 27,665 28,685 24,487 173,474 44,976 27,182 27,867 29,082 29,082One year later 24,879 22,660 28,695 27,109 19,450 201,947 46,117 26,550 27,828 27,828Two years later 20,929 21,960 28,386 24,478 20,006 232,390 43,331 28,391 28,391Three years later 18,793 21,118 27,373 24,553 21,530 279,700 40,150 40,150Four years later 17,690 24,872 27,474 24,971 21,654 286,125 286,125Five years later 19,976 23,807 28,840 24,760 21,813 21,813Six years later 19,984 22,893 29,008 26,313 26,313Seven years later 19,666 22,253 28,660 28,660Eight years later 19,764 22,061 22,061Nine years later 19,648 19,648

Current estimate of cumulative claims cost 111,636 19,648 22,061 28,660 26,313 21,813 286,125 40,150 28,391 27,828 29,082 641,707payments 106,844 19,578 21,752 27,555 24,234 20,236 220,725 31,915 19,728 13,389 5,802 511,758

Outstanding claims - undiscounted 4,792 70 309 1,105 2,079 1,577 65,400 8,235 8,663 14,439 23,280 129,949Discount to present value (216) (1) (8) (60) (124) (88) (12,411) (494) (473) (766) (1,265) (15,906)

Outstanding claims - long tail 4,576 69 301 1,045 1,955 1,489 52,989 7,741 8,190 13,673 22,015 114,043Outstanding claims - short tail 138,816Claims handling expenses 23,690Risk margin 46,077Total net outstanding claims liabilities 322,626Reinsurance and other recoveries receivable 816,755Total gross outstanding claims liabilities 1,139,381

At end of accident year

Accident year

Estimate of ultimate claims cost:



18.3 Claims development tables (continued)

The claims development tables discloses amounts net of reinsurance and third party recoveries to give the most meaningful insight into the impact on profit or loss. Short-tail claims are disclosed separately as they are generally subject to less uncertainty since they are normally reported soon after the incident and are generally settled within 12 months following the reported incident.

The balance of reinsurance and other recoveries receivable disclosed above is gross of deferred reinsurance liabilities of $171.8m for the Group and $142.4m for the Company (refer to Note 16).

18.4 Actuarial Assumptions and Methods a) Assumptions

The following key assumptions have been applied in determining the net outstanding claims liabilities of the Group and Company including claims arising from the Canterbury earthquakes:

Weighted average term to settlement - The average weighted term to settlement is calculated separately by class of business and is based on historic settlement patterns.

Company 2015Accident year Prior 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

8,056 4,740 9,585 7,554 6,022 146,243 23,465 7,821 8,929 8,054 8,054One year later 8,056 5,694 11,040 6,556 5,185 174,381 23,827 5,972 7,829 7,829Two years later 7,686 7,180 10,287 6,035 5,344 201,918 19,327 5,700 5,700Three years later 7,670 7,628 10,097 5,818 5,232 242,341 15,083 15,083Four years later 7,539 10,950 9,835 5,831 5,115 247,278 247,278Five years later 7,584 10,427 9,929 5,999 5,218 5,218Six years later 7,911 9,557 10,056 5,982 5,982Seven years later 7,912 9,262 10,073 10,073Eight years later 7,912 9,143 9,143Nine years later 7,912 7,912

Current estimate of cumulative claims cost 95,170 7,912 9,143 10,073 5,982 5,218 247,278 15,083 5,700 7,829 8,054 417,442Cumulative 90,378 7,912 9,014 10,059 5,964 5,139 190,372 12,886 4,370 4,602 2,132 342,828

Outstanding claims - undiscounted 4,792 - 129 14 18 79 56,906 2,197 1,330 3,227 5,922 74,614Discount to present value (216) - (3) - - (2) (10,953) (136) (29) (71) (158) (11,568)

Outstanding claims - long tail 4,576 - 126 14 18 77 45,953 2,061 1,301 3,156 5,764 63,046Outstanding claims - short tail 113,836Claims handling expenses 16,335Risk margin 32,155Total net outstanding claims liabilities 225,372Reinsurance and other recoveries receivable 744,279Total gross outstanding claims liabilities 969,651

Accident year

Estimate of ultimate claims cost:At end of accident year

2015 2014 2015 2014Weighted average term to settlement (years) 1.28 1.22 1.21 1.17Economic inflation rate 2.6% 2.1% 2.5% 1.9%Superimposed inflation rate 1.2% 1.0% 0.2% 0.1%Discount rate 3.0% 3.7% 3.0% 3.7%Claim handling expense ratio 9.4% 7.8% 9.2% 7.7%Risk margin 16.7% 14.3% 16.6% 14.0%




a) Assumptions (continued)

Inflation and superimposed inflation - Economic inflation is based on economic indicators such as the consumer price index and/or increases in average weekly earnings. Superimposed inflation reflects the tendency for some costs, such as court awards, to increase at levels in excess of economic inflation. Inflation assumptions are set at a class of business level and reflect past experience and future expectations

In some cases, no explicit assumption for inflation has been made. Instead, there is an implicit assumption that future inflation will be in line with past inflation. In these situations, the inflation assumption has been estimated after considering current information on a number of suitable indices.

Discount rate - The outstanding claims liability is discounted at a rate equivalent to that inherent in a portfolio of riskless fixed interest securities with coupon and redemption cash flows exactly matching the projected inflation claim cash flows.

Claim handling expense allowance - An estimate of outstanding claim liability will typically incorporate an allowance for the future cost of administering the claims. This allowance is determined after analysing claims related expenses incurred by the portfolio in question, adjusted for the expected pattern of payment of claim handling expenses during the life of a claim.

Risk margin - The overall risk margin is determined allowing for diversification between business classes and the relative uncertainty of the outstanding claims estimate for each class.

The assumptions regarding uncertainty for each class are applied to the net central estimates, and the results aggregated, allowing for diversification in order to arrive at an overall provision, which is intended to have a 90% (2014: 90%) probability of sufficiency (POS).

A net risk margin at an approximate 90% POS (2014: 90%) has been included in the net outstanding claims provision in respect of the 2010 and 2011 Canterbury earthquakes. The net risk margin takes into account: the retention and limits of the 2010 and 2011 Suncorp Group catastrophe programmes; the ADC contract for the February 2011 event; the timing of cash flows; and the currency exchange rates that are likely over the future payment period.

b) Impact of changes in assumptions

The Group and the Company conduct sensitivity analyses to quantify the exposure to the risk of changes in the key underlying actuarial assumptions. A sensitivity analysis is conducted on each variable, whilst holding all other variables constant. The tables below describe how a change in each assumption will affect the profit before tax. There is no impact on equity reserves.

Movement 2015 2014 2015 2014in variables $'000 $'000 $'000 $'000

+0.5 1,201 (1,276) (421) (2,342)-0.5 (1,197) 1,280 422 2,361

+1% 3,747 4,242 2,505 3,119-1% (3,740) (4,236) (2,502) (3,116)

+1% (3,731) (4,168) (2,468) (3,037)-1% 3,812 4,255 2,520 3,099

+1% 2,950 3,557 2,063 2,700-1% (2,950) (3,557) (2,063) (2,700)

+1% 2,765 3,355 1,932 2,550-1% (2,765) (3,355) (1,932) (2,550)

+1% 2,117 (213) 1,912 (173)-1% (2,117) 214 (1,912) 173

Discount rate

Risk margin


Weighted average term to settlement - years

Inflation rate

Claim handling expense ratio

Average future AUD:NZD exchange rate



c) Actuarial information

Richard Beauchamp is the Appointed Actuary for the Company. He is a Fellow of the New Zealand Society of Actuaries and a Fellow of the Institute of Actuaries (London). The Appointed Actuary receives a proportion of remuneration based on the financial results of the Group. Karl Marshall, of The Quantium Group Pty Limited, is the Appointed Actuary for Vero Liability Insurance Limited (VLIL) and AA Insurance Limited (AAIL). Mr Marshall is a Fellow of the Institute of Actuaries of Australia. Mr Marshall has no financial interest in the Group.

According to section 77(1) of the Insurance (Prudential Supervision) Act 2010 the Appointed Actuaries must review the actuarial information in, or used in the preparation of, the financial statements.

The outstanding claims reserves disclosed for the Company have been calculated in accordance with the New Zealand Society of Actuaries Professional Standard No.4.1 "Valuation of General Insurance Claims". The effective date of the Appointed Actuary’s advice is 31 March 2015, updated to 30 June 2015.

The outstanding claims reserves disclosed for VLIL and AAIL have been calculated in accordance with the New Zealand Society of Actuaries Professional Standard No.4.1 "Valuation of General Insurance Claims". The effective date of Mr Marshall’s advice is 31 March 2015, updated to 30 June 2015.

The Appointed Actuaries are satisfied that they have obtained all the information and explanations required. They are satisfied that the actuarial information has been used appropriately in the preparation of the financial statements and included appropriately in the financial statements.

In particular, the Appointed Actuaries are satisfied as to the nature, sufficiency and accuracy of the data used to determine the outstanding claims liabilities. There were no qualifications contained in their respective actuarial advice. The key assumptions used in the compilations of the reserves as at 30 June 2015 have been outlined above.

In addition, the Company’s Board Audit and Risk Committee (BARC) receives a Financial Condition Report (FCR) annually from the Appointed Actuary of the Company in accordance with the Act. The purpose of the FCR is to provide the Appointed Actuary’s objective assessment of the Company’s overall financial condition. It considers, among other things, the material risks facing the Company that, in the Appointed Actuary’s opinion, pose a threat to its ability to remain financially solvent now and in the future. The Appointed Actuary for the Company’s licensed insurance subsidiaries, VLIL and AAIL, also provides an FCR to his respective BARCs.



19. Employee benefit obligations

19.1 Defined benefit superannuation funds

The Group participates in three defined benefit superannuation funds which provide benefits to members on retirement, disability or death. All defined benefit funds are now closed to new members, with new employees now being given membership of a defined contribution fund.

The following tables summarises the deficit position for each defined benefit fund

The characteristics of the defined benefit funds and their associated risks are summarised as follows:

• Members receive regular pension payments or deferred pension payments. The amount of pensionpayable upon retirement of active members is determined based on final pensionable salary andpensionable service. Partial or full commutation of the pension may be allowed.

• The Financial Markets Conduct Act 2013 (which is transitioning to replace the SuperannuationSchemes Act 1989) governs the superannuation industry and provides the framework within whichsuperannuation schemes operate. The Act requires an actuarial valuation to be performed for eachdefined benefit superannuation scheme at least every three years.

• The Trustees of each scheme are responsible for the governance of the scheme. The Trustees havea legal obligation to act solely in the best interests of fund beneficiaries. The Trustees have thefollowing roles:

- Administration of the fund and payment to the beneficiaries from scheme assets when required inaccordance with the scheme rules;

- Management and investment of the scheme assets; and

- Compliance with superannuation law and other applicable regulations.

• The Financial Markets Authority licenses and supervises regulated superannuation schemes.

2015 2014 2015 2014$'000 $'000 $'000 $'000

Employee entitlements 20,751 19,206 13,645 12,551Net defined benefit liability 12,402 10,548 12,805 11,136Total employee benefits obligation 33,153 29,754 26,450 23,687Current 20,751 19,206 13,645 12,551Non-current 12,402 10,548 12,805 11,136Total employee benefits obligation 33,153 29,754 26,450 23,687


ConsolidatedSurplus Deficit Net Surplus Deficit Net

$'000 $'000 $'000 $'000 $'000 $'000Vero & Asteron New Zealand Staff Pension Scheme - (11,402) (11,402) - (7,979) (7,979)RIG Superannuation Fund - (676) (676) - (1,923) (1,923)Commercial Union General Insurance Staff Pension Scheme - (324) (324) - (646) (646)Total net defined benefit liability - (12,402) (12,402) - (10,548) (10,548)

2015 2014

CompanySurplus Deficit Net Surplus Deficit Net

$'000 $'000 $'000 $'000 $'000 $'000Vero & Asteron New Zealand Staff Pension Scheme - (11,805) (11,805) - (8,567) (8,567)RIG Superannuation Fund - (676) (676) - (1,923) (1,923)Commercial Union General Insurance Staff Pension Scheme - (324) (324) - (646) (646)Total net defined benefit liability - (12,805) (12,805) - (11,136) (11,136)

2015 2014



19.1 Defined benefits superannuation funds (continued)

• There are a number of risks to which each scheme exposes the Group. The more significant risksrelating to the defined benefits are:

- Investment risk – The risk that investment returns will be lower than assumed and the Group willneed to increase contributions to offset this shortfall.

- Mortality risk – The risk that the members of the scheme will live longer than assumed, increasing the number of pension payments and thereby requiring additional Group contributions.

- Legislative risk – The risk that legislative changes could be made which increase the cost of providing the defined benefits.

• Other Suncorp Group entities participate in the funds and the amounts included in these financialstatements relate to the Group’s share in relation to the members that are attributable to the Group.The Group is not liable for any deficits or contributions attributable to other Suncorp Group entities.

• There were no fund amendments or curtailments during the year. The RIG Superannuation Fundmade a cash offer to pensioners during the year with payments under the offer being treated as asettlement.

a) Present value of defined benefit fund

The value of assets and liabilities shown above are the combined values of the three funds.

b) Reconciliation of movements

2015 2014 2015 2014$'000 $'000 $'000 $'000

Fair value of fund assets at the end of the financial year 60,426 63,045 59,110 61,698Defined benefit obligations at the end of the financial year (68,735) (70,112) (67,689) (69,159)Adjustment for contributions tax (4,093) (3,481) (4,226) (3,675)Net liability recognised in the statements of financial position (12,402) (10,548) (12,805) (11,136)


2015 2014 2015 2014Changes in the fair value of plan assets $'000 $'000 $'000 $'000Balance at the beginning of the financial year 63,045 62,326 61,698 61,054Interest income 2,586 2,683 2,524 2,623Actual return on plan assets less interest income 2,934 2,117 3,024 2,140Contributions by Group companies 1,301 1,552 1,261 1,477Contributions by plan participants 9 15 9 15Benefits paid (4,788) (4,363) (4,762) (4,337)Settlements (4,348) (1,017) (4,348) (1,017)Premiums and expenses paid (313) (268) (296) (257)Balance at the end of the financial year 60,426 63,045 59,110 61,698




b) Reconciliation of movements (continued)

c) Categories of plan assets

The table above reflects the aggregate assets of the three defined benefit plans the Group participates in.

A review of the strategic asset allocation is undertaken every two years with the last review being completed in November 2013. The strategic asset allocation is implemented via investment mandates with external fund managers which sets a target weighting across asset classes to ensure appropriate asset-liability matching as well as benchmark return objectives.

d) Principal actuarial assumptions

The principal actuarial assumptions used in the valuation of the defined benefit funds are as follows:

Mortality assumptions are based on the New Zealand Life Tables 2010-2012 with a one year age setback and an age related future mortality improvement scale, starting from 2011 (the mid-point of the period on which the base Life Table was produced). A one year offset is used to reflect the lower mortality expected of pensioners relative to the overall New Zealand population.

2015 2014 2015 2014Changes in the present value of defined benefit fund obligations $'000 $'000 $'000 $'000Balance at the beginning of the financial year (70,112) (71,772) (69,159) (70,877)Current service cost (889) (881) (859) (854)Interest expense (2,856) (3,079) (2,813) (3,038)Contributions by plan participants (9) (15) (9) (15)Actuarial gains arising from changes in financial assumptions (5,800) (163) (5,674) (153)Actuarial losses/(gains) arising from liability experience 867 (28) 804 (11)Benefits paid 4,788 4,363 4,762 4,337Settlements 4,963 1,195 4,963 1,195Premiums and expenses paid 313 268 296 257Balance at the end of the financial year (68,735) (70,112) (67,689) (69,159)


2015 2014 2015 2014Major categories of plan assets as a percentage of total fund assets % % % %Equity 33.5 33.9 33.5 34.0Fixed Income 36.2 36.3 36.2 36.3Investments in managed funds 17.5 16.9 17.5 16.8Cash 12.8 12.9 12.8 12.9

100.0 100.0 100.0 100.0


2015 2014 2015 2014% % % %

Discount rate 3.74 - 3.79 4.30 - 4.65 3.74 - 3.79 4.30 - 4.65Future salary increases 3.0 3.5 3.0 3.5




d) Principal actuarial assumptions (continued)

The weighted average duration (in years) of each of the defined benefit funds obligation is:

e) Sensitivity Analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding all other assumptions constant, would have affected the aggregate defined benefit obligation by the amounts shown below:

f) Funding

The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. The funding requirements are based on an actuarial valuation performed for each defined benefit superannuation fund at least once every three years. The actuarial valuations for funding purposes prepared under applicable actuarial standards are different to the actuarial valuations prepared in accordance with accounting standards. Assumptions used in actuarial valuations for funding purposes may also be different to those described in section (d) above.

For the Vero & Asteron New Zealand Staff Pension Scheme other Suncorp Group entities participate in the plan. The Group’s share of the $950,000 lump sum is apportioned based on the members in the scheme attributable to Group.

Actuarial recommendations of the employer contribution rates are:

Vero & Asteron New Zealand Staff Pension Scheme 20% of pensionable salaries plus attributable share of $950,000

RIG Superannuation Fund $350,000

Commercial Union General Insurance Staff Pension Scheme

Nil

The Group intends to contribute $1,801,000 to the defined benefit funds in the financial year ending 30 June 2016 in line with the actuaries’ latest recommendations.

19.2 Share-based payments

The Company is a wholly owned subsidiary of Suncorp Group Holdings (NZ) Limited, with the ultimate parent being Suncorp Group Limited (SGL). Eligible employees of the Company have the right to participate in the Suncorp Group Limited share plans. Shares offered in these share plans are granted by SGL over its own shares to employees of SGL subsidiaries.

Long-term incentives (performance rights)

Long-term incentives (LTI) are performance rights granted to eligible executives. These are equity-settled and in limited circumstances cash-settled at the SGL Board’s discretion. The SGL Board determines the value of shares granted (offered) based on the executive’s remuneration and individual performance.

2015 2014 2015 2014Vero & Asteron New Zealand Staff Pensions Scheme 13 13 13 13RIG Superannuation Fund 9 9 9 9Commercial Union General Insurance Staff Pension Scheme 10 8 10 8


2015 2015 2015 2015Increase Decrease Increase Decrease

$'000 $'000 $'000 $'000Discount rate movement (100 basis points) (7,682) 9,418 (7,522) 9,210Future salary increases (100 basis points) 1,428 (1,330) 1,388 (1,295)One year movement in life expectancy 1,924 (1,997) 1,902 (1,971)




19.2 Share-based payments (continued)

Vested shares carry full entitlement to dividend from the grant date (less any taxes paid by the plan trustee in respect of such dividends).

Vesting of LTI is subject to performance hurdles and service conditions being met during the performance period. The performance hurdle is based on SGL’s total shareholder returns (TSR) against the TSR of a peer comparator group, which is the top 50 industrial companies by market capitalisation in the S&P/ASX 100 (excluding mining companies and listed property trusts). Generally, the performance period commences on the grant date for a three year period. For LTI granted on or prior to 3 May 2010, the performance period may be extended for a further two years. The percentage of performance rights that will vest is based on the LTI vesting schedule. No LTI will vest unless SGL achieves a relative TSR of 50th percentile (median) or above. Any performance rights not vested at the end of the performance period are forfeited.

The expense included in the profit or loss in relation to LTI for the financial year ended 30 June 2015 for the Group and Company was $209,486 (2014: $190,193).

SGL operates other equity-settled share plans that are not subject to performance conditions. Key features are set out below:

The expense included in the profit or loss in relation to restricted shares for the financial year ended 30 June 2015 for the Group and Company was $71,945 (2014: $34,792). The expense included in the profit or loss in relation to the Suncorp Employee Share plan for the financial year ended 30 June 2015 for the Group was $959,671 (2014: $1,050,740) and for the Company was $921,591 (2014: $1,015,430).

The SGL Board approved a grant to each eligible employee ordinary shares of SGL to the value of AUD $1,000 (2014: AUD $1,000) under the Suncorp Employee Share Plan (tax exempt) for the financial year. These shares will be acquired on-market for allocation to employees by the share plan in October 2015 (2014: October 2014).

Equity plans Restricted shares Suncorp Employee Share plan (tax exempt)

Eligible plan participant

Employees in senior roles below executive level that satisfy the eligibility criteria.

Employees not eligible for LTI awards.

Basis of share grant / issue

Value of restricted shares granted (offered) is determined by the Board based on the employee’s remuneration and individual performance.

Market value of shares up to AUD $1,000 per employee per year may be granted by the Board based on the Suncorp Group’s overall performance.

Vesting Subject to remaining in employment with the Suncorp Group until the vesting date and not having given notice of intention to resign.

Fully vested, not subject to forfeiture.

Dividend entitlements

Full entitlement from when the shares are allocated to the participating employee and held in the Plan.

Full entitlement to dividend from when the shares are acquired and held in the Plan.

Fair value Discounted cash flow model incorporating the expected share price at vesting date and expected dividends entitlements, discounted from the vesting date to the grant date.

Market value of the shares on the date they were acquired.



20. Share capital

The Company does not have authorised capital or par value in respect of its issued shares. All shares are fully paid.

As at 30 June 2015, the Company had 184,687,954 ordinary shares with no par value issued to Suncorp Group Holdings (NZ) Limited (2014:184,687,954). All shares rank equally with one vote attached to each fully paid ordinary share.

21. Capital management

21.1 Capital management policies and objectives

The Group is part of the Suncorp Group. The capital management strategy of the Suncorp Group is to optimise shareholder value by managing the level, mix and use of capital resources. The primary objective is to ensure there are sufficient capital resources to maintain and grow the business, in accordance with risk appetite. The Suncorp Group’s Internal Capital Adequacy Assessment Process (ICAAP) provides the framework to ensure that the Suncorp Group as a whole, and each regulated entity, is capitalised to meet internal and external requirements. The ICAAP is reviewed regularly and, where appropriate, adjustments are made to reflect changes in the capital needs and risk profile of the Suncorp Group.

The Company and its two general insurance subsidiaries Vero Liability Insurance Limited and AA Insurance Limited are licensed insurance companies in accordance with the Insurance (Prudential Supervision) Act 2010 (the Act). All three companies manage their capital in accordance with the requirements of the Act and the Solvency Standard for Non-life Insurance Business (the Solvency Standard) issued by the Reserve Bank of New Zealand.

The Company and its licensed insurance subsidiaries are required to maintain a solvency margin of at least $0, i.e. actual solvency capital as determined under the Solvency Standard should be at or above the minimum solvency capital level. The actual amount retained as minimum solvency capital and determined by the Directors of the companies as appropriate to ensure their financial soundness, and the basis for determining the amount are set out below.

The Group and Company satisfied all externally imposed capital requirements which they were subject to during the year ended 30 June 2015.

The Company and its licensed insurance subsidiaries have embedded in their capital management framework the necessary tests to ensure continuous and full compliance with the Solvency Standard.

The Company and its subsidiaries Board Audit and Risk Committees oversees the capital computations and maintain the optimal capital structure by advising their respective Boards on dividend payments and share issues. In addition, the Group manages its required level of capital through analysis and optimisation of the product and asset mix, reinsurance program, catastrophe exposure and investment strategy.

2015 2015 2014 2014Shares Shares Shares Shares

No. (000) $'000 No. (000) $'000Issued and fully paid ordinary shares 184,688 270,509 184,688 270,509Shareholder contribution under equity settled employee share plans - 5,938 - 5,656Total share capital 184,688 276,447 184,688 276,165

Balance at the beginning of the financial year - 5,656 - 5,431Contributions under equity settled share plans - 282 - 225Balance at the end of the financial year - 5,938 - 5,656

Movements in shareholder contributions under equity settled employee share plans

Company Company



21.2 Capital composition

The Group and Company manage their capital by considering both regulatory and economic capital. The primary source of capital used is total equity attributable to owners. Total equity attributable to owners equates to capital as defined in the Solvency Standard and shown in Note 21.3 below.

21.3 Regulatory capital

Regulatory capital is made up of two components, actual solvency capital and minimum solvency capital with the difference representing the solvency margin. The calculation of the solvency margin for the Group, being the Company and its two general insurance subsidiaries Vero Liability Insurance Limited and AA Insurance Limited (Licensed Insurer Group), and the Company is detailed below:

22. Credit rating

The Company and its general insurance subsidiaries have the following Standard & Poor’s ratings which provides an indication of their ability to pay current and future claims.

2015 2014 2015 2014$'000 $'000 $'000 $'000

Actual solvency 394,370 406,465 268,532 283,016Minimum solvency capital 219,655 234,244 164,802 183,768Solvency margin 174,715 172,221 103,730 99,248Solvency ratio 1.80 1.74 1.63 1.54

Licensed Insurer Group Company

2015 2014Vero Insurance New Zealand Limited A+ A+Vero Liability insurance Limited A+ A+AA Insurance Limited A+ A+

Credit Rating



23. Notes to the statements of cash flows

24. Financial instruments

24.1 Comparison of fair value to carrying amounts

Investment securities are recognised and measured at fair value and therefore their carrying value equates to their fair value.

Investments traded in an active market are valued with reference to the closing quoted market price.

The significant majority of other investments are valued using independently sourced valuations that do not involve the exercise of judgement by management.

Financial assets and liabilities that are not recognised and measured at fair value include cash and cash equivalents, receivables and other assets and payables. The basis of recognition and measurement of these financial assets and liabilities is described in Note 30. Their carrying value is a reasonable approximation of their fair value.

2015 2014 2015 2014$'000 $'000 $'000 $'000

Profit for the financial year 159,559 86,824 142,557 83,052Non-cash itemsMovement in financial assets at fair value through profit or loss

(12,290) 9,390 (5,036) 14,200

Depreciation and amortisation expense 5,682 6,552 4,759 5,446Loss/(profit) on disposal of plant and equipment 63 (1) 57 15Share-based payments 282 225 282 225Movement in defined benefit fund (2,213) 2,050 (1,984) 2,125Change in assets and liabilitiesDecrease in receivables and other assets 6,299 38,798 23,464 54,167Decrease in reinsurance and other recoveries receivable

283,711 782,915 325,544 792,237

(Increase)/decrease in deferred reinsurance premiums

(40,948) 73,724 (33,209) 70,515

Increase in deferred acquisition costs (2,851) (4,073) (2,353) (4,666)Decrease in current tax assets - - - 5,852(Increase)/decrease in deferred tax assets (5,768) 7,493 (4,302) 6,933Increase/(decrease) in payables and other liabilities 227,441 (68,209) 191,878 (64,138)Adjustment for outstanding dividend 8,934 (8,934) 8,934 (8,934)Increase in unearned premium liabilities 24,666 42,219 9,581 21,204(Decrease)/increase in current tax liabilities (14,314) 17,413 (8,645) 11,109Decrease in outstanding claims liabilities (344,598) (732,514) (390,867) (747,875)Increase/(decrease) in employee benefit obligations 3,399 (4,228) 2,763 (4,802)

Increase in deferred tax liabilities 867 1,028 674 1,315Net cash from operating activities 297,921 250,672 264,097 237,980




24.2 Fair value hierarchy

Financial assets and liabilities that are recognised and measured at fair value are categorised by a hierarchy which identifies the most significant input used in the valuation methodology:

• Level 1 – derived from quoted prices (unadjusted) in active markets for identical financial instruments.

• Level 2 – derived from other than quoted prices included within Level 1 that are observable for the financial instruments, either directly or indirectly.

• Level 3 – fair value measurement is not based on observable market data.

The Level 2 securities held by the Group represent investment securities and derivative assets/liabilities valued using a market comparison technique. For investment securities the fair value is calculated using observable inputs from a non active market for an identical security with the valuation reflecting the exit price for the security. For derivatives the fair value is based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments.

* The fair value hierarchy of term deposits and transferable certificates has been reclassified from Level 1 to Level 2 due to the investments not being traded in an active market. This reclassification amounted to $104,382,000 for the Group and $77,805,000 for the Company.

There have been no significant transfers between Level 1 and Level 2 during the year ended 30 June 2015 for the Group or Company.

Level 1 Level 2 Level 3 Total$'000 $'000 $'000 $'000

ConsolidatedAs at 30 June 2015Financial assetsInvestment securities 128,231 780,383 - 908,614 Derivatives - 98 - 98

128,231 780,481 - 908,712 As at 30 June 2014Financial assetsInvestment securities* 151,616 728,498 - 880,114 Financial liabilitiesDerivatives - 495 - 495

CompanyAs at 30 June 2015Financial assetsInvestment securities 108,814 507,371 - 616,185 Derivatives - 98 - 98

108,814 507,469 - 616,283 As at 30 June 2014Financial assetsInvestment securities* 119,848 480,127 - 599,975 Financial liabilitiesDerivatives - 495 - 495



24.3 Master netting or similar arrangements

The Company is party to certain interest rate swap agreements with New Zealand based financial institutions which are settled on a net basis. The financial asset and liability positions under these contracts are offset within the statements of financial position. The table below shows the impact of this offsetting:

24.4 Accounting classification and fair values

The fair values of financial assets and liabilities, together with the carrying amount shown in the statement of financial position, are as follows:

* Payables and other liabilities excludes GST payable which is not a financial liability as it is created as a result of statutory requirements as opposed to being a contractual obligation.

Gross amountsOffsetting

applied

Net amount presented in the

Statement of Financial Position

$'000 $'000 $'0002015Financial AssetsInvestment securities - Derivatives 1,334 (1,190) 144Financial LiabilitiesInvestment securities - Derivatives 1,236 (1,190) 46Net financial asset 982014Financial AssetsInvestment securities - Derivatives 4,045 (4,045) -Financial LiabilitiesInvestment securities - Derivatives 4,540 (4,045) 495Net financial liability 495

Consolidated and Company

Designated at Fair Value

Loans and Receivables

Other Financial Liabilities

Carrying amount Fair Value

2015 $'000 $'000 $'000 $'000 $'000Cash and cash equivalents - 264,602 - 264,602 264,602Receivables and other assets - 489,983 - 489,983 489,983Investment securities 908,651 61 - 908,712 908,712

908,651 754,646 - 1,663,297 1,663,297Payables and other liabilities* - - (472,725) (472,725) (472,725)2014Cash and cash equivalents - 79,253 - 79,253 79,253Receivables and other assets - 494,099 - 494,099 494,099Investment securities 879,553 66 - 879,619 879,619

879,553 573,418 - 1,452,971 1,452,971Payables and other liabilities* - - (247,591) (247,591) (247,591)

Consolidated



24.4 Accounting classification and fair values (continued)

* Payables and other liabilities excludes GST payable which is not a financial liability as it is created as a result of statutory requirements as opposed to being a contractual obligation.

25. Risk management

25.1 Risk management objectives and structure

As the Company and its subsidiaries are entities within the Suncorp Group, the Company and its subsidiaries work within the context of the Suncorp Group risk management objectives and structure as described below.

The Suncorp Group Limited Board recognises that effective risk management is considered to be critical to the achievement of the Suncorp Group’s objectives. This recognition is echoed by the Company’s Board. The Company’s Board Audit and Risk Committee (BARC) is responsible for assisting the Company's Board in fulfilling its responsibilities with respect to the oversight of all categories of risk, which includes the identification, assessment and management of risk, and adherence to risk management and other policies and procedures. The Company’s subsidiaries, Vero Liability Insurance Limited (VLIL) and AA Insurance Limited (AAIL) have their own respective BARCs which also perform this role.

An Enterprise Risk Management Framework (ERMF) is in place for the Suncorp Group. It is subject to an annual review, updated for material changes as they occur and is approved by the Group Board, and separately endorsed by the Company’s Board. The ERMF comprises:

• the Suncorp Group’s risk appetite framework and its link to strategic business and capital plans. Risk Appetite is set at Suncorp Group level and at the BU level in Board-approved Risk Appetite Statements. Each company in the Group has its own RAS.

• accountabilities and governance arrangements for the management of risk within the Three Lines of Defence model.

• risk management processes.

Designated at Fair Value

Loans and Receivables

Other Financial Liabilities

Carrying amount Fair Value

2015 $'000 $'000 $'000 $'000 $'000Cash and cash equivalents - 230,502 - 230,502 230,502Receivables and other assets - 357,966 - 357,966 357,966Investment securities 616,222 61 - 616,283 616,283

616,222 588,529 - 1,204,751 1,204,751Payables and other liabilities* - - (409,492) (409,492) (409,492)2014Cash and cash equivalents - 65,448 - 65,448 65,448Receivables and other assets - 378,032 - 378,032 378,032Investment securities 599,414 66 - 599,480 599,480

599,414 443,546 - 1,042,960 1,042,960Payables and other liabilities* - - (218,553) (218,553) (218,553)

Company



25.1 Risk management objectives and structure (continued)

The Three Lines of Defence model of accountability as it applies to the Company involves:

Line of Defence Responsibility of Accountable for

First – Manage risk and comply with Company adopted Suncorp Group, and Company specific frameworks, policies and the Company’s risk appetite

All business areas (and staff)

• Identify and manage the risks inherent in their operations including control testing

• Ensure compliance with all legal and regulatory requirements and Company adopted Suncorp Group, and Company specific Suncorp Group policies

• Promptly escalate any significant actual and emerging risks for management attention

Second – Independent functions own and monitor the application of risk frameworks, and measure and report on risk performance and compliance

All risk functions • Design, implement and manage the ongoing maintenance of risk frameworks and related policies

• Advise and partner with the business in the design and execution of risk frameworks and practices

• Develop, apply and execute risk frameworks that are consistent with the Suncorp Group for the respective business areas

• Facilitate the reporting of the appropriateness and quality of risk management

Third – Independent assurance over internal controls and risk management practices

Internal auditors and specific obligations of the Appointed Actuaries

• Decides the level and extent of independent testing required to verify the efficacy of internal controls

• Validates the overall risk framework • Provides assurance that the risk management

practices are functioning as intended

Management recommends to the Company Board, and the Board has approved, various frameworks, policies and limits relating to key categories of risk faced by the Group. Management has the primary responsibility and accountability for embedding the risk management framework within the business operations of the Company. The Company has a Chief Risk Officer (CRO) who has the management responsibility for risk, compliance and related issues. This person indirectly reports to the Group Chief Risk Officer employed by the ultimate parent company. This person also acts as the CRO for VLIL but not for AAIL which has its own CRO.

The Company and its subsidiaries have in place a number of Management Committees, each with its own charter, to execute specified responsibilities in the risk framework.

These committees include a Vero NZ Asset and Liability Committee (ALCO) and a Vero NZ Risk and Governance Committee (RGC). The primary role of the Vero NZ ALCO is to oversee the management of selected financial risks arising from the activities of the Vero NZ business within the Company Board and VLIL Board approved risk parameters: Insurance Risk: includes the following economic aspects– Pricing, Reserving, Concentration and Reinsurance; Counterparty Risk; Market Risk; Balance Sheet Risk; and Liquidity Risk.

The ALCO provides effective governance over aspects of the risk framework designed to optimise the long-term returns achieved by portfolios within any risk appetite or parameters established by the Board.

The primary role of the Vero NZ RGC is to oversee the management of governance and other non-financial aspects of selected risks arising from the activities of the business within the Company and VLIL Board approved risk parameters: Insurance Risk, Compliance Risk, Operational Risk and Strategic Risk.

A Risk Management Program (RMP) approved by the RGC and endorsed by the Board is prepared. This is subject to annual review and is submitted to the Reserve Bank of New Zealand. The RMP describes the strategy adopted by the Board for managing risk, including the risk appetite, policies, procedures, management responsibilities and controls.



25.1 Risk management objectives and structure (continued)

The key risks addressed by the Enterprise Risk Management Framework are described below.

Key risks Definition

Credit risk (counterparty risk)

The risk that a counterparty will not meet its obligations in accordance with agreed terms

Liquidity risk The risk that the Group will be unable to service its cash flow obligations today or in the future

Market risk The risk of unfavourable changes in foreign exchange rates, interest rates, equity prices, credit spreads, commodity prices, and market volatilities

Asset and liability risk

The risk to earnings and capital from mismatches between assets and liabilities with varying maturity and repricing profiles and from mismatches in term

Insurance risk The risk of financial loss and the inability to meet liabilities due to inadequate or inappropriate insurance product design, pricing, underwriting, concentration risk, reserving, claims management and/or reinsurance management

Operational risk The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events

Compliance risk The risk of legal or regulatory sanctions, financial loss, or loss to reputation which the Company may suffer as a result of its failure to comply with all applicable regulations, codes of conduct and good practice standards

Strategic risk The risk that our business model or strategy is not viable due to uncertainties in the future operating environment

The Group is mainly exposed to the following categories of market risks:

Categories of market risk Definition

Foreign exchange (FX) risk

The risk of an asset or liability’s value changing unfavourably due to changes in currency exchange rates

Interest rate risk The risk of loss of current and future earnings and unfavourable movements in the value of interest bearing assets and liabilities from changes in interest rates

Equity risk The risk of loss in current and future earnings and unfavourable movement in the value of investments in equity instruments from adverse movements in equity prices

Credit spread risk Credit spread is the difference in yield due to difference in credit quality. This is the risk of loss in current and future earnings and unfavourable movement in the value of investments from changes in the credit spread as determined by capital market sentiment or factors affecting all issuers in the market and not necessarily due to factors specific to an individual issuer

Further discussions on the application of the Group’s risk management practices are presented in the following sections:

• Note 25.2 Insurance risk management

• Note 25.3 to 25.5 Group risk management for financial instruments: credit, liquidity and market risks.



25.2 Group insurance risk management a) Policies and practices for mitigating insurance risk

Controls are implemented to manage the following components of insurance risk:

• pricing, including pricing strategies, technical pricing and pricing adequacy reviews;

• roles and responsibilities for pricing, the development and approval of new products and changes to existing products;

• processes that identify and respond to changes in the internal and external environment impacting insurance products;

• underwriting, including processes to consider aggregate exposures from a portfolio perspective to determine the actual exposure to particular risks or an event, monitoring of significant accumulation and concentration of risk, and guidelines around the utilisation of reinsurance in pricing and underwriting;

• delegated authorities for the acceptance, assessment and settlement of claims including operational and ex-gratia authority limits;

• procedures relating to the notification, assessment, evaluation, settlement and closure of claims, and processes to detect and reduce loss associated with claims risk; and

• reserving practices and procedures at individual claim and portfolio level.

Concentration of insurance risk is mitigated through diversification over classes of insurance business, industry segments, the use of reinsurer coverage and ensuring there is an appropriate mixture of business. Catastrophe and facultative reinsurance contracts are purchased to ensure that any accumulation of losses from a single event is mitigated.

b) Terms and conditions of insurance business

Insurance contracts are generally entered into on an annual basis and at the time of entering into a contract all terms and conditions are negotiable or, in the case of renewals, renegotiated. Non-standard and long-term policies may only be written if expressly approved by a relevant delegated authority. There are no special terms and conditions in any non-standard contracts that would have a material impact on the consolidated financial statements.

25.3 Credit risk

The Group is exposed to and manages the following key sources of credit risk.

Key sources of credit risk How are these managed

Premiums receivable

For instalment business, outstanding premiums on policies arise on those which are generally paid on a monthly instalment basis. Payment default will result in the termination of the insurance contract with the policyholders, eliminating both the credit risk and insurance risk for the unpaid balance. Where business is written through intermediaries, limited credit is provided under the terms and conditions of the agreement with the respective intermediary, with debtor control ensuring constant attention is paid to minimise overdue debts.

Investments in financial instruments

Investments in financial instruments in the investment portfolios are held in accordance with the investment mandates. Credit limits have been established within these guidelines to ensure counterparties have appropriate credit ratings. An investment framework is in place that sets and monitors investment strategies and arrangements.

Reinsurance recoveries Eligible recoveries under reinsurance arrangements are monitored and managed internally and by specialised reinsurance brokers operating in the international reinsurance market.



25.3 Credit risk (continued)

Concentration of credit risk arises when a number of financial instruments or contracts are entered into with the same counterparty or where a number of counterparties are engaged in similar business activities that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Concentration of credit risk is managed by individual counterparty, by credit rating. The Company and Group do not expect any counterparties to fail to meet their obligations given their credit ratings and therefore does not require collateral or other security to support credit risk exposures. Over-concentration of credit risk is avoided by placement of cover with a number of reinsurers as well as setting participation limits and minimum security requirements on the reinsurance programme. Reinsurance is placed only with companies with Standard & Poor’s credit ratings (or equivalent if a Standard & Poor’s rating is unavailable) of "A minus" or better in accordance with policy.

The carrying amount of the relevant asset classes in the statements of financial position represents the maximum amount of credit exposures.

For investment securities, credit ratings of counter parties for which credit risk is assessed only relate to the interest bearing securities of the Group which include interest bearing securities held at fair value through profit or loss and staff mortgages.

There has been no material change in the credit risk faced by the Group or the policies and processes for managing the risk during the period.

AAA AA A BBB

Non-investment

gradeNot

Rated Total2015 $'000 $'000 $'000 $'000 $'000 $'000 $'000Cash and cash equivalents - 186,346 78,256 - - - 264,602Investment securities 74,332 475,977 225,227 16,088 - 61 791,685Derivatives - 98 - - - - 98Reinsurance and other recoveries net of recoveries received in advance - 333,475 282,134 - - 29,390 644,999Accrued income - - - - - 7,312 7,312Investment receivables - - - - - 2,183 2,183Premiums due - - - - - 434,908 434,908Amounts due from related parties - - 3,810 - - - 3,810Amounts due from reinsurers - 4,754 32,235 - - 7 36,996

74,332 1,000,650 621,662 16,088 - 473,861 2,186,5932014Cash and cash equivalents - 42,382 36,871 - - - 79,253Investment securities 968 596,271 153,704 24,889 - 66 775,898Derivatives - (495) - - - - (495)Reinsurance and other recoveries - 517,246 552,856 - - 30,364 1,100,466Accrued income - - - - - 7,342 7,342Investment receivables - - - - - - -Premiums due - - - - - 411,780 411,780Amounts due from related parties - - 1,901 - - - 1,901Amounts due from reinsurers - 6,195 63,752 - - 9 69,956

968 1,161,599 809,084 24,889 - 449,561 2,446,101

ConsolidatedCredit Rating




All financial assets are neither past due nor impaired at balance date except for those disclosed in the following table. An amount is considered past due when a contractual payment falls overdue by one or more days. When an amount is classified as past due, the entire balance is disclosed in the past due analysis presented.

AAA AA A BBB

Non-investment

gradeNot

Rated Total2015 $'000 $'000 $'000 $'000 $'000 $'000 $'000Cash and cash equivalents - 154,375 76,127 - - - 230,502Investment securities 55,410 377,146 170,687 12,586 - 60 615,889Derivatives - 98 - - - - 98Reinsurance and other recoveries net of recoveries received in advance - 326,598 260,808 - - 14,523 601,929Accrued income - - - - - 5,825 5,825Investment receivables - - - - - 2,197 2,197Premiums due - - - - - 305,793 305,793Amounts due from related parties - - 4,315 - - - 4,315Amounts due from reinsurers - 3,672 31,393 - - 11 35,076

55,410 861,889 543,330 12,586 - 328,409 1,801,6242014Cash and cash equivalents - 36,147 29,301 - - - 65,448Investment securities 968 475,007 102,990 20,704 - 66 599,735Derivatives - (495) - - - - (495)Reinsurance and other recoveries - 505,532 547,361 - - 16,930 1,069,823Accrued income - - - - - 5,856 5,856Premiums due - - - - - 294,740 294,740Amounts due from related parties - - 1,915 - - - 1,915Amounts due from reinsurers - 5,206 67,249 - - 9 72,464

968 1,021,397 748,816 20,704 - 317,601 2,109,486

CompanyCredit Rating

Neither past due

nor impaired 0-3 mths 3-6 mths

6-12 mths >12 mths Impaired Total

2015 $'000 $'000 $'000 $'000 $'000 $'000 $'000Premiums due 416,727 16,420 1,022 733 - 6 434,9082014Premiums due 394,037 15,461 1,324 950 - 8 411,780

ConsolidatedPast due but not impaired




25.4 Liquidity risk

To ensure payments are made when they fall due, the Group has the following key facilities and arrangements in place to mitigate liquidity risks:

• investment portfolio mandates provide sufficient cash deposits to meet day-to-day obligations; • investment funds set aside within the portfolio can be realised to meet significant claims payment

obligations; • in the event of a major catastrophe, cash access is available under the terms of reinsurance

arrangements; • mandated liquidity limits; • regularity of premiums received provides substantial liquidity to meet claims payments and

associated expenses as they arise; and • flexibility in investment strategies implemented for investment management to provide sufficient

liquidity to meet claim payments as they fall due, based on actuarial assumptions.

There has been no material change in the liquidity risk faced by the Group or the policies and processes for managing the risk during the period.

The table below summarises the maturity profile of certain financial liabilities based on the remaining undiscounted contractual obligations. It also includes the maturity profile for outstanding claims liabilities determined on the discounted estimated timing of net cash outflows.

Neither past due

nor impaired 0-3 mths 3-6 mths

6-12 mths >12 mths Impaired Total

2015 $'000 $'000 $'000 $'000 $'000 $'000 $'000Premiums due 288,536 15,512 1,012 733 - - 305,7932014Premiums due 277,884 14,532 1,236 1,088 - - 294,740

CompanyPast due but not impaired

Carrying amount

1 year or less 1 to 5 years

Over 5 years Total

2015 $'000 $'000 $'000 $'000 $'000Amounts due to reinsurers 212,912 147,959 64,953 - 212,912Trade creditors and accruals 68,490 68,490 - - 68,490Outstanding claims liabilities 1,139,381 643,568 437,477 58,336 1,139,381Amounts due to related parties 1,052 1,052 - - 1,052

1,421,835 861,069 502,430 58,336 1,421,8352014Amounts due to reinsurers 171,227 171,227 - - 171,227Trade creditors and accruals 64,703 64,703 - - 64,703Outstanding claims liabilities 1,483,979 814,037 589,214 80,728 1,483,979Amounts due to related parties 10,882 10,882 - - 10,882

1,730,791 1,060,849 589,214 80,728 1,730,791

Consolidated



25.4 Liquidity risk (continued)

25.5 Market risk

The main source of market risk comes from the investment portfolios. The Group’s business has distinct investment portfolios, each with their own investment mandate. The investment mandates specify investment restrictions including but not limited to asset class limits, authorised investments, duration limits, derivative restrictions, minimum credit ratings and counterparty credit limits.

The Group and Company’s investment portfolio is split into Insurance Funds and Shareholder Funds.

The Insurance Funds investment portfolios support the outstanding claims liabilities of the business. The portfolios are managed over benchmarks set in a manner consistent with the expected duration of claims payments ensuring any variations from a matched position is constrained. Assets held are fixed interest securities.

The Shareholder Funds are held for the investment of funds in support of share capital and retained profits. To provide better expected returns on capital, the investment mandate for this portfolio has a more diverse investment strategy predominantly including fixed interest securities and cash. The investment mandates balance expected investment returns, volatility of expected investment returns and the impact of volatility on both the capital adequacy and profitability of the business.

Investment securities are measured at fair value and changes in fair value are recognised in the profit or loss.

There has been no material change in the market risk faced by the Group or the policies and processes for managing the risk during the period.

a) Interest rate risk

Interest rate risk arises from the investments in interest bearing securities. Interest rates have an impact on both the value of assets and liabilities and the main sources of loss are adverse changes in the valuation of investments in interest-bearing securities and outstanding claims liabilities.

A change in the market value of investments in interest-bearing securities is immediately recognised in the profit and loss. The insurance funds hold significant interest-bearing securities in support of corresponding insurance provisions and are invested in a manner consistent with the expected duration of claims payments.

Carrying amount

1 year or less 1 to 5 years

Over 5 years Total

2015 $'000 $'000 $'000 $'000 $'000Amounts due to reinsurers 179,528 121,217 58,311 - 179,528Trade creditors and accruals 57,605 57,605 - - 57,605Outstanding claims liabilities 969,651 547,197 373,293 49,161 969,651Amounts due to related parties 15,945 15,945 - - 15,945

1,222,729 741,964 431,604 49,161 1,222,7292014Amounts due to reinsurers 145,359 145,359 - - 145,359Trade creditors and accruals 58,679 58,679 - - 58,679Outstanding claims liabilities 1,360,518 740,558 543,771 76,189 1,360,518Amounts due to related parties 13,576 13,576 - - 13,576

1,578,132 958,172 543,771 76,189 1,578,132

Company



a) Interest rate risk (continued)

The valuation of the outstanding claims liabilities includes the discounting to present value at balance date of expected future claim payments. Any assessment of the impact of changes in interest rates on investment income must include the offsetting adjustment to claims expense for changes in discount rates adopted in outstanding claims valuations.

This risk is managed by establishing investment portfolio mandates on the basis of the appropriate matching principles so as to ensure the impact on the operating result of changes in the general level of market interest rates is minimised.

The sensitivity of profit or loss after tax to movements in interest rates in relation to interest-bearing financial assets held at the balance date is shown in the table below. There is no impact on equity reserves. It is assumed that all residual exposures for the shareholder after tax are included in the sensitivity analysis, that the percentage point change occurs at the balance date and there are concurrent movements in interest rates and parallel shifts in the yield curves. Given the volatility experienced in the market during the last year, a movement of 100 basis points (2014:100 basis points) is considered reasonably possible and has been applied to the sensitivity analysis.

At the reporting date measurement of the cash and cash equivalents is not sensitive to movements in the interest rates and so a change in interest rates as at reporting date would have no impact on either profit or equity from the measurement of cash and cash equivalents for the current financial year.

Interest-bearing investment securities are recognised on the statements of financial position at fair value. Movements in market interest rates impact the price of the securities (and hence their fair value measurement) and so would impact either profit or equity.

Consolidated

ExposureChange in

variable

Profit (loss) after tax &

equity ExposureChange in

variable


equity$'000 % $'000 $'000 % $'000

+1 (8,656) +1 (6,923)-1 9,366 -1 7,339

+1 - +1 --1 - -1 -

791,722 775,337

2015 2014

Interest bearing investment securities

Derivative financial instruments

791,624

98

775,832

(495)

Company

ExposureChange in

variable



variable


equity$'000 % $'000 $'000 % $'000

+1 (7,071) +1 (5,620)-1 7,745 -1 6,029

+1 - +1 --1 - -1 -

615,926 599,174

2015 2014

Interest bearing investment securities

Derivative financial instruments

615,828

98

599,669

(495)



b) Foreign exchange risk

The Group and Company are exposed to foreign exchange risk arising from the minimum deposit premiums associated with the Suncorp Group’s catastrophe reinsurance treaty. The Group and Company hedges the minimum deposit premiums for the upcoming year to address the foreign exchange risk.

All claim payments in relation to the Canterbury Earthquake claims are made in New Zealand dollars. However, the catastrophe reinsurance programme applicable to these events is denominated in Australian dollars. An Adverse Development Cover (ADC) placed to cover Suncorp’s net exposure to losses arising from the February 2011 Canterbury earthquake is also denominated in Australian dollars.

The difference in currency used for paying claims and determining reinsurance recoveries means that movements in the AUD:NZD exchange rate can affect the net incurred claims position. This foreign exchange rate risk also applies to any commutations or recoveries received in advance from the Australian-denominated reinsurance programme. Allowance is made for this foreign exchange risk through actuarial estimates of the net outstanding claims liability.

With effect from the 30 June 2013 financial year, the Suncorp Group catastrophe reinsurance treaty includes a fixed AUD:NZD exchange rate to eliminate this foreign exchange risk on subsequent events.

With the exception of the above, the Group and Company is not exposed to material foreign exchange risk.

c) Credit spread risk

The Group is exposed to credit spread risk through its investments in interest bearing securities. This risk is mitigated by incorporating a diversified investment portfolio, establishing maximum exposure limits for counterparties and minimum limits on credit ratings.

The table below presents a sensitivity analysis on how credit spread movements could affect profit or loss for the exposure as at the balance date. There is no impact on equity reserves.

Sensitivity of the Group and Company’s credit exposure to a +/- 100 basis point (2014: 100 basis points) change in yield is as follows:

Consolidated

ExposureChange in

variable



variable


equity$'000 % $'000 $'000 % $'000

+1 (5,762) +1 (4,383)

-1 6,317 -1 4,640+1 (2,894) +1 (2,540)-1 3,048 -1 2,699

791,722 775,337

2015 2014

Discounted securities, corporate bonds and derivatives

573,811 555,735

219,602Government and local government securities 217,911

Company

ExposureChange in

variable



variable


equity$'000 % $'000 $'000 % $'000

+1 (4,602) +1 (3,458)

-1 5,142 -1 3,709+1 (2,468) +1 (2,162)-1 2,603 -1 2,320

615,926 599,174

Government and local government securities 173,448

423,520

175,654

2015 2014

Discounted securities, corporate bonds and derivatives

442,478



d) Equity/commodity price risks

The Group holds unit trust investments that expose the Group to equity price risk. The profit and loss impact on equity price movement is determined by multiplying market value by the variable of +/- 200 basis points (2014: 200 basis points):

The Company does not hold any securities that expose the Company to material equity or commodity price risk.

25.6 Capital management

The Group and Company’s capital management policies and objectives together with details of the amount of equity retained for the purpose of financial soundness are described in Note 21.

26. Commitments of expenditure

The Group leases a number of commercial office premises and car parks throughout New Zealand with varying lease terms of up to 12 years from the date of inception with periodic rent reviews.

27. Related parties

27.1 Controlling entities

Vero Insurance New Zealand Limited is a wholly owned subsidiary of Suncorp Group Holdings (NZ) Limited. The ultimate parent entity of the Company is Suncorp Group Limited, a company incorporated in Australia

All members of the Suncorp Group are considered to be related parties of the Group and Company. This includes the subsidiaries of Vero Insurance New Zealand Limited identified in Note 14.

Some of the Directors of the Company’s subsidiary Vero Liability Insurance Limited (VLIL) are also Directors of Rasal Management Limited (Rasal). Rasal has a management agreement with VLIL to provide management services.

Consolidated

ExposureChange in

variable



variable


equity$'000 % $'000 $'000 % $'000

+2 1,103 +2 1,032-2 (1,103) -2 (1,032)

+2 581 +2 468-2 (581) -2 (468)

116,929 104,216

2015 2014

Domestic equities/unit trusts 76,573 71,688

International equities/unit trusts 40,356 32,528

2015 2014 2015 2014$'000 $'000 $'000 $'000

Lease commitments

Within one year 10,102 11,017 6,189 7,462Later than one year but not later than 5 years 22,084 26,206 9,167 16,523Later than 5 years 4,797 77 - -Non cancellable operating leases 36,983 37,300 15,356 23,985


Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:



27.2 Transactions and balances

Suncorp Group arranges reinsurance contracts with third parties on behalf of the Company and these transactions and balances have been included within the reinsurance transactions and balances recorded in the normal course of business.

2015 2014 2015 2014$'000 $'000 $'000 $'000

Premiums receivedSubsidiaries - - 5,102 8,306Fellow subsidiaries of the ultimate parent 109 180 95 165Premiums paidFellow subsidiaries of the ultimate parent 359 340 253 239Reinsurance recoveries paidSubsidiaries - - 105,631 94,763Reinsurance recoveries receivedFellow subsidiaries of the ultimate parent 187,295 - 156,233 -Accounting and administration fees receivedSubsidiaries - - 10,643 10,287Fellow subsidiaries of the ultimate parent 5,380 3,371 5,347 3,370Accounting and administration services paidSubsidiaries - - 1,478 1,234Fellow subsidiaries of the ultimate parent 27,932 20,834 27,520 20,490Management services and profit shares paidOther related parties 2,192 2,316 250 250Loan facility feesFellow subsidiaries of the ultimate parent 167 292 167 292Forward foreign exchange contract settlement paymentFellow subsidiaries of the ultimate parent 36,899 92,949 36,899 92,949Employer contributions paid to superannuation schemesOther related parties 502 507 487 492Group tax loss offsets receivedSubsidiaries - - 5,476 5,169Group tax loss offsets paidParent 144 - 144 -Fellow subsidiaries of the ultimate parent 51,367 1,778 46,368 -Dividends receivedSubsidiaries - - 32,300 34,800Dividend paidParent 67,300 152,000 67,300 152,000




27.2 Transactions and balances (continued)

Aggregate amounts receivable from or payable to related parties as at 30 June 2015 and 30 June 2014 are as follows:

All balances are unsecured, non-interest bearing and repayable on demand.

27.3 Key management personnel

Key Management Personnel (KMP) are those persons who have authority and responsibility for planning, directing and controlling the activities of the Company, directly and indirectly. KMP include all Directors of the Company (executive and non-executive) as well as Senior Executives who report to the CEO. G T Ricketts and P J R Snowball are remunerated directly by Suncorp Group.

28. Auditor’s remuneration

2015 2014 2015 2014$'000 $'000 $'000 $'000

Amounts receivable from:Subsidiaries - - 459 -Fellow subsidiaries of the ultimate parent 3,810 1,901 3,856 1,915Total amounts receivable from related parties 3,810 1,901 4,315 1,915

Amounts payable to:Parent - 8,934 - 8,934Subsidiaries - - 15,945 3,834Fellow subsidiaries of the ultimate parent 50 807 - 808Other related parties 1,002 1,141 - -Total amounts payable to related parties 1,052 10,882 15,945 13,576


2015 2014 2015 2014$'000 $'000 $'000 $'000

Short-term employee benefits 9,688 9,514 5,651 5,239Post employment benefits 131 182 131 182Long-term benefits 1,606 826 1,293 615Termination benefits - 1,323 - 1,323Share based payment 549 422 549 422Total Compensation 11,974 12,267 7,624 7,781


2015 2014 2015 2014$'000 $'000 $'000 $'000

During the year the auditor of the Company was paid for the following services:

Audit feesAudit of annual accounts of the Company 621 611 621 611Audit of annual accounts of the Company’s subsidiaries 238 232 - -Non-audit feesAssurance engagements on RBNZ solvency returns 255 252 138 136Agreed upon procedure engagements 6 6 6 6Total auditor's remuneration 1,120 1,101 765 753




29. Contingent liabilities

There were no contingent liabilities as at 30 June 2015 (2014: Nil).

30. Significant accounting policies

The Group’s significant accounting policies set out below have been consistently applied by all Group entities to all periods presented in these consolidated financial statements.

30.1 Basis of consolidation

The Group’s consolidated financial statements are financial statements of the Company and all its subsidiaries presented as those of a single economic entity. Intra-group transactions and balances are eliminated on consolidation.

a) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date when control commences until the date when control ceases.

Investments in subsidiaries held by the Company are accounted for at cost in the separate financial statements of the Company less any impairment charges.

b) Non-controlling Interests

Non-controlling interests occur when the Group does not hold 100% of the shares or units in a subsidiary. They represent the external equity or liability interests in non-wholly owned subsidiaries. Non-controlling interests are recognised as equity. Related items of income and expense are recognised in the profit and loss at their gross amounts, with the offsetting amount attributable to non-controlling interests disclosed separately in the profit and loss.

30.2 Business combinations

The acquisition method of accounting is used to account for business combinations by the Group. The cost of an acquisition is measured as the fair value of the assets transferred, liabilities incurred, and equity instruments issued by the Group at the acquisition date. Acquisition-related costs are expensed in the period in which they are incurred. Where equity instruments are issued in an acquisition, their value is the published market price at the acquisition date. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

The acquiree’s identifiable assets acquired, liabilities assumed, contingent liabilities, and any non-controlling interests are measured at their fair values at the acquisition date. If the consideration transferred and any non-controlling interest in the acquiree is greater than the fair value of the net amounts of the identifiable assets acquired and liabilities assumed, the excess is recorded as goodwill; otherwise, the difference is recognised immediately in the profit and loss after a reassessment of the identification and measurement of the net assets acquired.

30.3 Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity associated investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.



30.4 Foreign currency

Transactions denominated in foreign currencies are initially translated to New Zealand dollars at the spot exchange rates ruling at the date of the transaction. Foreign currency monetary assets and liabilities at the end of the reporting period are translated to New Zealand dollars at the spot rates of exchange current on that date. The resulting differences on monetary items are recognised in the profit and loss as exchange gains and losses in the financial year in which the exchange rates change. Foreign currency non-monetary assets and liabilities that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency non-monetary assets and liabilities that are stated at fair value are translated to New Zealand dollars at foreign exchange rates ruling at the dates the fair value was determined.

30.5 Revenue and expense recognition a) Premium Revenue

Premium revenue comprises amounts charged to policyholders. Premium excludes applicable levies and charges such as fire service levies collected on behalf of third parties, and is recognised net of goods and services tax. Premiums are recognised as revenue in accordance with the pattern of the underlying risk exposure from the date of attachment over the period of the insurance policy, which is usually one year.

Premiums on unclosed business are brought to account by reference to the prior year’s experience and information that has become available between the reporting date and the date of completing the consolidated financial statements.

b) Claims expense

Claims expense represents payments for claims and the movement in outstanding claims liabilities. Claims represent the benefits paid or payable to the policyholder on the occurrence of an event giving rise to a loss or accident according to the terms of the policy. Claims expenses are recognised in profit or loss as losses are incurred, which is usually the point in time when the event giving rise to the claim occurs.

c) Reinsurance

Reinsurance commission income

Commission received from reinsurers is recognised as revenue systematically in accordance with the expected pattern of the incidence of risk under the general insurance contracts to which it relates. This pattern of amortisation corresponds to the pattern of recognising the corresponding premium revenue.

Reinsurance and other recoveries revenue

Reinsurance and other recoveries receivable are measured as the present value of the expected future receipts, calculated on the same basis as outstanding claims liabilities.

Outwards reinsurance expense

Premiums ceded to reinsurers are recognised as an expense from the attachment date over the period of indemnity of the reinsurance contract in accordance with the expected pattern of the incidence of risk.

Reinsurance premiums are deferred and recognised as an asset where there are future economic benefits to be received from reinsurance premiums.

d) Investment Revenue

Interest income is recognised in profit or loss using the effective interest method.

Dividends and distribution income are recognised when the right to receive income is established.

Investment revenue is classified as either investment income on insurance funds or shareholder funds. Investment income on insurance funds represents revenue derived from financial assets backing general insurance liabilities as detailed in Note 30.10(c) while investment income from shareholder funds represents revenue from financial assets that do not back general insurance liabilities.



30.6 Income tax

Income tax payable on profits, based on New Zealand applicable tax law, is recognised as an expense in the period in which profits arise.

Deferred income tax is provided in full and is recognised on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

The principal temporary differences arise from depreciation of plant and equipment, revaluation of certain financial assets and liabilities, including derivative contracts, provision for employee entitlements, deferred acquisition costs, tax losses carried forward and in relation to acquisitions, on the difference between the fair values of the net assets acquired and their tax base. The rates enacted or substantially enacted at the reporting date are used to determine deferred income tax.

Deferred tax assets are recognised where it is probable that future taxable profits will be available against which the temporary differences can be utilised.

The tax effect of income tax losses available for carry forward are recognised as an asset when it is probable that future taxable profits will be available against which these losses can be utilised.

Where an item, which gives rise to a temporary difference, is recognised in or against equity, the deferred tax is also recognised in or against equity.

a) Goods and service tax

Revenue, expenses, assets and liabilities are recognised net of the recoverable amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or the amount of expense.

Net earned premium is net of the GST component of premium. Receivables and payables are stated inclusive of GST where applicable. The net amount of GST recoverable from, or payable to, the tax authority is included as an asset or liability in the statements of financial position.

30.7 Cash and cash equivalents

Cash and cash equivalents include cash on hand, other short-term highly liquid investments with original maturities of three months or less from the acquisition date, and deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

For the purposes of the statements of cash flows, cash and cash equivalents consists of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are shown within liabilities in the statements of financial position unless a right of offset exists.

30.8 Receivables and other assets

Amounts due from policyholders, intermediaries and other receivables are initially recognised at fair value, being the amounts receivable. They are subsequently measured at fair value, being the initial recognised amount and reducing it for impairment as appropriate. Any impairment charge is recognised in the profit and loss. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts receivable according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. Non-current receivables are discounted using interest rates on government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash inflows.

30.9 Payables and other liabilities

These amounts represent liabilities for goods and services provided to the Group prior to the end of the period, which are unpaid.



30.10 Financial assets

A financial asset is recognised in the statements of financial position when the Group becomes a party to the contractual provisions of the instrument. Initial recognition is at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset except for financial assets at fair value through profit or loss which exclude transaction costs.

All purchases and sales of financial assets that require delivery of the asset within the time frame established by regulation or market convention are recognised at trade date, being the date on which the Group commits to buy or sell the asset. Financial assets are derecognised when the rights to receive future cash flows from the assets have expired, or have been transferred, and the Group has transferred substantially all risk and rewards of ownership.

Financial assets are classified into one of the following categories upon initial recognition: • Financial assets at fair value through profit or loss; or

• Loans and receivables.

At each reporting date measurement depends upon the chosen classification.

a) Financial assets at fair value through profit or loss

A financial asset at fair value through profit or loss is a financial asset that meets either of the following conditions: • It is classified as held for trading; or

• Upon initial recognition it is designated by the Group as at fair value through profit or loss.

The assets are valued at fair value at each reporting date based on the current quoted market price where available. Where a quoted price is not available one of the following valuation techniques are used to value the assets at reporting date: recent arms length transactions, discounted cash flow analysis, option pricing models or other valuation techniques commonly used by market participants.

Movements in the fair value are taken immediately to the profit or loss.

b) Loans and receivables

Loans and receivables are measured at each reporting date at amortised cost using the effective interest method, less any impairment losses. This method allocates the estimated net future cash receipts over the expected life of the financial instrument.

c) General insurance activities

Financial assets backing general insurance liabilities

The assets of the Group are assessed under NZ IFRS 4 Insurance Contracts to be assets that are held to back general insurance liabilities (referred to as insurance funds) and assets that represent shareholder funds.

The Group has designated financial assets held in portfolios intended to match the average duration of a corresponding insurance liability as assets backing general insurance liabilities. These financial assets include investment securities and are designated at fair value through profit or loss as they are managed and their performance evaluated on a fair value basis for internal and external reporting in accordance with the investment strategy.

All investment securities held to back general insurance liabilities are highly liquid securities. Despite some of these securities having maturity dates beyond the next twelve months, as they are highly liquid in nature and are actively traded, they have been classified as current.

Financial assets not backing general insurance liabilities

Financial assets that do not back general insurance liabilities include investments and loans and receivables. Investments have been designated at fair value through profit or loss as they are managed and their performance evaluated on a fair value basis for internal and external reporting in accordance with the investment strategy. Loans and receivables related to investments are measured at each reporting date at amortised cost using the effective interest method.



30.11 Financial liabilities

Financial liabilities are initially recognised at fair value plus transaction costs that are directly attributable to the issue of the financial liability, except for financial liabilities at fair value through profit or loss which exclude transaction costs. A financial liability is derecognised when it is extinguished, that is, when the obligation specified in the contract is discharged or cancelled or expires.

Financial liabilities are classified into one of the following categories upon initial recognition. At each reporting date measurement depends upon the chosen classification.

a) Financial liabilities at fair value through profit or loss

A financial liability at fair value through profit or loss is a financial liability that meets either of the following conditions: • it is classified as held for trading; or

• upon initial recognition it is designated by the Group as at fair value through profit or loss.

b) Financial liabilities at amortised cost

Financial liabilities, other than financial liabilities at fair value through profit or loss, are subsequently measured at amortised cost using the effective interest method.

30.12 Lease transactions

Payments made under operating leases are expensed on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

30.13 Plant and Equipment a) Recognition and initial measurement

An item of plant and equipment is recognised (capitalised) as an asset if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Plant and equipment is initially measured at cost, which comprises: • purchase price, including import duties and non-refundable purchase taxes, after deducting trade

discounts and rebates; and

• any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and

• the initial estimate of the costs of removal and site restoration, if any.

b) Subsequent measurement

Subsequent additional costs are only capitalised when it is probable that future economic benefits in excess of the originally assessed performance of the asset will flow to the Group in future years. Where these costs represent separate components, they are accounted for as separate assets and are separately depreciated over their useful lives. Costs that do not meet the criteria for subsequent capitalisation are expensed as incurred.

The Group has elected to use the cost model (as opposed to the revaluation model) to measure plant and equipment after recognition. The carrying amount is the initial cost less accumulated depreciation and any accumulated impaired losses.



c) Depreciation

The depreciable amount of each item of plant and equipment is depreciated over its estimated useful life to the Group. The straight-line method of depreciation is adopted for all assets. Assets are depreciated from the date they become available for use. Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of plant and equipment. Useful lives and depreciation methods are reviewed at each annual reporting period. Residual values, if significant, are reassessed annually.

The following depreciation rates have been used: • Computer Hardware 33%• Furniture and Fittings 20%• Office Equipment 10%-33% • Leasehold Alterations 20%• Motor Vehicles 14%-26%

d) Retirement

The carrying amount of plant and equipment is derecognised upon disposal or where no future economic benefits are expected from its use. The gain or loss arising from the derecognition is recognised in the profit and loss when the item is derecognised and calculated as the difference between the carrying amount of the asset at the time of derecognition and the net proceeds of derecognition.

30.14 Intangibles a) Initial recognition and measurement

Intangible assets, other than goodwill, are stated at cost less any accumulated amortisation and any accumulated impairment losses. Cost comprises all directly attributable costs necessary to purchase, create, produce, and prepare the asset to be capable of operating in the manner intended by management. Where an intangible asset is acquired in a business combination, the cost of that asset is its fair value at the acquisition date.

Expenditure on internally generated goodwill and brands is recognised in the profit and loss as an expense as incurred.

Intangibles comprise computer software and goodwill.

b) Subsequent expenditure

Subsequent expenditure on intangible assets (not acquired in a business combination) is capitalised only when it increases the originally assessed future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

c) Amortisation

Amortisation is charged to the profit and loss in a manner that reflects the pattern in which the asset’s future economic benefits are expected to be consumed over the estimated useful lives of intangible assets, unless such lives are indefinite. An intangible asset is regarded as having an indefinite useful life when, based on all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Group. Where the asset is deemed to have an indefinite life, it is not amortised but tested for impairment at least on an annual basis.

Where applicable, intangible assets are amortised from the date they are available for use and the amortisation period and method are reviewed on an annual basis.

The useful life of software has been assessed as three to five years and it is amortised on a straight line basis over this period.

d) Goodwill

Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investment in associates. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment.



30.15 Impairment

Assets of the Group are assessed for indicators of impairment at each reporting date. Indicators include both internal and external factors. If any such indication exists, the asset’s recoverable amount is estimated.

Goodwill acquired in a business combination, assets that have an indefinite useful life and intangible assets not yet available for use have their recoverable amount estimated annually.

An impairment loss is recognised whenever the asset’s carrying amount exceeds its recoverable amount. Impairment losses are recognised in the profit and loss unless the asset has previously been revalued. In that case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through Other Comprehensive Income. After the recognition of an impairment loss, the depreciation (amortisation) charge for the asset is adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units) – this may be an individual asset or a group of assets.

For the purpose of assessing impairment of goodwill, goodwill is allocated to cash-generating units representing the Group’s investment in each of its business lines, which are its primary reporting segments. Impairment losses, if any, recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis.

a) Calculation of recoverable amount

The recoverable amount of the Group’s loans and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate computed at initial recognition of these financial assets. Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

The unwinding of the discount from initial recognition of impairment through to recovery of the written down amount is recognised through interest income.

b) Reversal of impairment

An impairment loss for an asset other than goodwill is reversed in following periods if there are indications that the impairment loss previously recognised no longer exists or has decreased. The impairment loss is reversed in the profit and loss only to the extent that it increases the asset back to its original carrying amount before any impairment was recorded. An impairment loss recognised for goodwill is not reversed.

30.16 Employee benefit obligations a) Short term employee benefits

Wages, salaries and annual leave

Liabilities for unpaid wages, salaries and annual leave due within 12 months are recognised in the statements of financial position. The liability is measured at undiscounted amounts using pay rates expected to be effective when the liability is to be paid in respect of employees’ services up to the reporting date. Related on-costs such as payroll tax are also included in the liability.

Sick leave

Sick leave entitlements are non-vesting and are paid only upon valid claims for sick leave by employees. No liability for sick leave has been recognised as experience indicates that on average, sick leave taken each financial year is less than the entitlement accruing in that period. This experience is expected to recur in future financial years.



Short term bonus plans

A liability is recognised for short term bonus plans when the benefit calculations are formally documented and determined before signing the financial statements and past practice supports the calculation.

Other leave and non-monetary benefits

The cost associated with parental leave as well as non-monetary benefits such as car-parking, payments of professional memberships and discounts is recognised in the period in which the employee takes the benefits. A liability is not recognised for any non-accumulating benefits employees have not taken during the period.

b) Post-employment benefits (superannuation)

The Group contributes to both defined contribution and defined benefit superannuation funds. Contributions are charged to the profit and loss as the obligation to pay is incurred. Contributions outstanding at reporting date are treated as liabilities and prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments are available.

For defined contribution funds, the Group pays contributions to publicly or privately administered pension insurance funds on a mandatory, contractual or voluntary basis. The Group's legal or constructive obligation is limited to these contributions. The defined benefit funds provide defined pension annuities and lump sum benefits based on years of service and final average salary.

The Group's net obligation in respect of defined benefit funds is calculated separately for each fund by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any fund assets.

The calculation of defined benefit obligations is performed annually by independent actuaries using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of the economic benefits available in the form of any future refunds from the fund or reductions in the future contributions to the fund. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on fund assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The Group determines the net interest expense to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability/(asset), taking into account any changes in the net defined benefit liability/(asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to the defined benefit funds are recognised in profit and loss.

When the benefits of a fund are changed or when a fund is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss in the period in which they arise.

c) Other long term employee benefits

Long service leave

A liability for long service leave is recognised in the statements of financial position. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using Government bond rates with terms to maturity that match, as closely as possible, the estimated future cash outflows. Related on-costs such as payroll tax are also included in the liability.

Annual Leave

A liability for annual leave which will not be settled within 12 months after the reporting date is recognised in the statements of financial position. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.



d) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.

e) Share-based payments

The fair value of share-based payments is recognised as an expense on a straight line basis over the vesting period, with a corresponding increase in equity. The fair value is calculated on grant date as the fair value of each share granted multiplied by the number of shares expected to eventually vest. The fair value of the share-based payments is based on the market price of the shares, dividend entitlements, and market vesting conditions (e.g. share price related performance criteria) upon which the shares were granted. Non-market vesting conditions (e.g. service conditions) are taken into account by adjusting the number of shares which will eventually vest and are not taken into account in the determination of the grant date fair value. On a cumulative basis, no expense is recognised for shares granted that do not vest due to a non-market vesting condition not being satisfied.

30.17 Deferred insurance activities a) Deferred acquisition costs (DAC)

Acquisition costs include commissions and other selling and underwriting costs incurred in obtaining general insurance premiums. Acquisition costs are deferred and recognised as an asset when they can be reliably measured and where it is probable that they will give rise to premium revenue that will be recognised in profit or loss in subsequent reporting periods.

DAC are amortised systematically in accordance with the expected pattern of the incidence of risk under the general insurance contracts to which they relate.

DAC are recognised as assets to the extent that the related unearned premiums exceed the sum of the DAC and the present value of both future expected claims and settlement costs, including an appropriate risk margin. Where there is a shortfall, the DAC asset is written down and if insufficient, an unexpired risk liability is recognised.

b) Deferred reinsurance premiums

Deferred reinsurance premiums are recognised as assets in the statements of financial position. The amortisation of deferred reinsurance premiums is in accordance with the pattern of reinsurance service received. The amount deferred represents the future economic benefit to be received from reinsurance contracts.

30.18 Outstanding claims liabilities

The outstanding claims liability is measured as the central estimate of the present value of expected future payments against claims incurred at the reporting date and includes an additional risk margin to allow for the inherent uncertainty in the central estimate.

Standard actuarial methods are applied to all classes of business to assess the net central estimate of outstanding claims liabilities. The outstanding claims liability is heavily dependent on assumptions and judgements. The details of actuarial assumptions and the process for determining the risk margins are set out in Note 18.4.



30.19 Unearned premium liabilities

Premium revenue received and receivable but not earned is recognised as unearned premium liabilities.

The carrying value of unearned premium liabilities is assessed at each reporting date by carrying out a liability adequacy test (LAT). This test assesses whether the net unearned premium liabilities less any DAC is sufficient to cover future claims costs for in-force insurance contracts. Future claims costs are calculated as the present value of the expected cash flows relating to future claims, and include a risk margin to reflect the inherent uncertainty in the central estimate. The assessment is carried out on a portfolio of contracts basis. If a LAT deficiency occurs, it is recognised in the profit or loss with a corresponding write-down of the related DAC asset. Any remaining balance is recognised as an unexpired risk liability in the statements of financial position.

30.20 Contributed capital

a) Ordinary shares

Ordinary shares are recognised as equity.

b) Transaction Costs

Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit. Transaction costs in excess of the proceeds of the equity instruments issued, or where no proceeds are raised, are recognised as an expense.

c) Capital Contributions to Subsidiaries

Contributions of capital to subsidiaries in the form of equity settled share based payments, are recognised as an increase in equity of the fair value of instruments provided at grant date.

d) Dividends

Provision is made for the amount of any dividend declared, determined or publicly recommended by the Directors on or before the end of the financial year but not distributed at reporting date.

Where a dividend is declared post reporting date but prior to the date of the issue of the financial reports, disclosure of the declaration is made in the financial statements but no provision is made.

30.21 Contingent liabilities and contingent assets

Contingent liabilities are not recognised in the statements of financial position but are disclosed in the financial statements, unless the possibility of settlement is remote, in which case no disclosure is made. If settlement becomes probable and the amount can be reliably estimated, a provision is recognised.

Contingent assets are not recognised in the statements of financial position but are disclosed in the financial statements when inflows are probable. If inflows become virtually certain, an asset is recognised.

The amount disclosed as a contingent liability or contingent asset is the best estimate of the settlement or inflow.

30.22 Changes in accounting estimates

If a change in an accounting estimate gives rise to a change in an asset or liability, or relates to equity, it is recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change. Otherwise, it is recognised prospectively by including it in the profit and loss in the period of the change and future periods, as applicable.



30.23 New accounting standards and interpretations not yet adopted

NZ IFRS 9 Financial Instruments was issued and introduces changes in the classification and measurement of financial assets and financial liabilities, impairment of financial assets and new rules for hedge accounting. This standard becomes mandatory for the Group’s 30 June 2019 financial statements. The potential effects on adoption of the standard are currently being assessed. It is available for early adoption but has not been applied by the Group in this financial report.

31. Subsequent events

On 29 July 2015 the Directors resolved to pay fully imputed ordinary dividends of $80,000,000 being 43.32 cents per share.

There were no other material events post 30 June 2015 which would require adjustment to the amounts reflected in the 30 June 2015 financial statements or disclosures thereto.

vero insurance new zealand limited and subsidiaries · p j r snowball executive g c dransfield...

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